Don't you love it when all three of the top publicly traded dogs in discount brokering report during the same week? E*Trade
In its December quarter, E*Trade earned $0.40 a share on a 31% top-line surge. That was better than the $0.32 per share it had earned a year earlier and just ahead of the $0.39-per-share showing that analysts were targeting.
Like TD AMERITRADE, E*Trade got a revenue boost from recent acquisitions. However, the impressive earnings-per-share profit growth figure takes that into account. In short, it was a solid showing for all three players.
Despite its name, E*Trade is generating less and less of its revenue from the daily grind of clients buying and selling stocks. Moving away from market-driven trading activity forces, the company is now leaning on net operating interest income for the majority of its revenue.
What is that, exactly? Well, E*Trade is becoming more of a traditional banking concern. It's a sweet place to be, raking in the difference between the high rates it stands to collect in loaning out greenery (through direct loans like home equity credit lines and conventional mortgages as well as margin interest) and the lower rates it pays out to its income investing patrons. In other words, E*Trade may be milking the magnetism of the juicy 5.05% yield on its popular savings account, but there are higher rates coming back to the company when it's the one doling out the funds.
It's working, and this isn't just a one-quarter blip. For all of 2006, E*Trade's adjusted bottom line clocked in at $1.49 a share. That compares favorably to the $1.12 per share it produced in profitability a year earlier.
So well done, E*Trade, Schwab, and TD AMERITRADE. It was a week worth remembering. Let's not forget to do this all over again in three months.
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Longtime Fool contributor Rick Munarriz has been trading exclusively through discount brokers since 1990, but he does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.