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Factors that Could Impact E*TRADE in Q2 2018

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April trading activities

E*TRADE Financial’s (ETFC) performance revolves around performance metrics such as interest income and trading revenues. The company’s interest income is primarily impacted by interest rate movements. If the Federal Reserve announces a rate increase, the company’s interest income would benefit.

The company’s trading revenues are also impacted by the Daily Average Revenue Trades (or DARTs). DARTs increase primarily when volatility in the market increases.

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E*TRADE Financial saw 309,000 DARTs in the first quarter, which implies a substantial sequential increase. In its conference call for the first quarter, the company’s management stated that from April 1 to April 19, the company reported subdued momentum in its DARTs. The company’s trading revenues for the second quarter are expected to be impacted by this trend.

Expected EPS

Wall Street analysts gave an average estimate on E*TRADE’s earnings per share for the second quarter of $0.87, reflecting a year-over-year increase. Analysts gave a high estimate of $0.92 and a low estimate of $0.80.

Analysts gave an average EPS estimate of the company’s competitors (XLF) Interactive Brokers Group (IBKR), TD Ameritrade Holding (AMTD), and Charles Schwab (SCHW) of $0.54, $0.80 and $0.59, respectively, for the second quarter.

E*TRADE’s fees and service charges also represent a component in the company’s total net revenues. These charges reached $105.0 million in the first quarter, representing an increase of $12.0 million sequentially. This trend was mainly due to order flow revenues due to a boost in trading activities and increased foreign exchange fees.

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