Which Brokerage Stocks Have the Strongest Earnings Trends?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

Stocks with improving earnings metrics are worthy of your extra attention. Click here to discover our CHEAT SHEET stock picks now!

Here’s your Cheat Sheet to how the top 4 brokerage stocks rank via earnings trends:

Charles Schwab Corp. (NYSE:SCHW): Current Price $15.45

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 5,150 4,193 4,248 4,691 4,883
Diluted EPS ($) 1.05 0.68 0.38 0.70 0.69

Schwab has been very inconsistent with earnings since 2007. Clearly, this is not a strong trend for EPS.

Let’s take a closer look at the quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 1,113 1,189 1,283 1,196 1,215
Diluted EPS ($) 0.12 0.15 0.20 0.19 0.15

Earnings over the last two quarters are slowing down, and we need to look for better candidates…

Interactive Brokers Group, Inc. (NASDAQ:IBKR): Current Price $14.06

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 2,182 1,170 988.32 1,445 1,192
Diluted EPS ($) 2.24 0.79 -0.23 1.37 0.89

Interactive is obviously volatile on the earnings front, though it has picked itself up after suffering a disastrous 2010.

Now, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 328.69 323.06 277.02 332.80 259.60
Diluted EPS ($) 0.28 0.27 0.17 0.26 0.19

The brokerage shows fluctuating quarterly revenue and earnings, with the last quarter falling off despite equity markets have been on a roll. Not a good fit for us…

TD AMERITRADE Holding (NASDAQ:AMTD): Current Price $18.45

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 2,537 2,408 2,560 2,763 2,641
Diluted EPS ($) 1.33 1.10 1.00 1.11 1.06

Now here’s a steady performance on earnings, but we’re worried that revenue has stayed essentially flat over the past five years.

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 703.80 653.39 673.14 667.26 647.20
Diluted EPS ($) 0.29 0.27 0.25 0.28 0.26

It’s very much the same story on the quarterly front. Unexciting numbers to say the least. We need to look some more…

E*TRADE Financial (NASDAQ:ETFC): Current Price $10.18

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 2,101 3,128 2,789 2,398 2,349
Diluted EPS ($) -34.00 -10.04 -11.85 -0.13 0.54

E-Trade has turned the corner after 2009, showing better annual earnings thereafter. But revenue has been going downhill since 2008.

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 585.40 552.27 566.81 527.82 563.14
Diluted EPS ($) 0.24 -0.02 0.22 0.14 -0.10

The quarterly data is dismal, with earnings losing steam every quarter since March 2012. Obviously, this stock does not make our watch list.

Conclusion

Disappointingly, at the moment none of these brokerages make the grade on our “E-Squared” investment analysis.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!