[B] WRAP: E*Trade breaks even in Q2, trouncing Wall Street forecasts
By Cameron Dueck, Bridge News
New York--Apr 12--E*Trade Group Inc.(EGRP), the second-largest online
brokerage firm, reported its first break-even quarter since the company
announced in September 1998 it would sacrifice earnings for increased marketing
and expansion. E*Trade's revenues climbed strongly in the second quarter as
break-even earnings beat the 16-cent per share loss forecast by Wall Street.
The Menlo Park, California-based firm said it broke even based on ongoing
operations, compared with a loss of $13.3 million, or 5 cents per share in the
year-ago period. The total net loss for the quarter was $23.2 million, or 8
cents per share, compared with year-ago net income of $8.5 million, or 3 cents
per share.
Investors cheered the fiscal report, propelling E*Trade shares higher by
37.50 cents, or 1.6 percent, to $23.8125 in afternoon trade.
Revenues totaled $407 million, up from $162 million in the year-ago period.
Both the firm's account and revenue growth surpassed analyst estimates,
reflecting the market's high trading volumes and enthusiasm of individual
investors.
E*Trade said it added 603,000 new accounts during the quarter compared with
363,000 new accounts in the previous quarter and 240,000 accounts in the
year-ago period.
Customer assets totaled $65.2 billion, up $18.4 billion from the previous
quarter's $46.8 billion. E*Trade's asset growth in the past has at times lagged
behind account growth as the firm captures lower-asset customers, but analysts
said assets came in higher than expected in the second quarter.
"They had a fantastic quarter," said Tim Butler, analyst at Pacific Crest
Securities. "Their revenues blew away my estimates, and their customer account
number blew away my estimates."
"There's a seasonal pattern to it, but a lot of it depends on trading
volume, and the general direction of stock prices, and this quarter they clearly
had a strong wind at their back," he said.
Increased market volumes helped boost E*Trade's daily average transactions
to 229,000 from 133,000 in the previous quarter and 70,000 in the year-ago
quarter.
E*Trade's net loss figure includes charges of $21.8 million, or 7 cents per
share for expenses related to acquisition of Telebanc, an online bank.
"The company, despite the fact that they have done a great job of
diversifying revenues, continues to be driven off their account numbers,"
said Scott Appleby, an analyst at Robertson Stephens.
"We're now more focused on delivering the bottom line over time," said
Christos Cotsakos, E*Trade's chairman and chief executive officer in a
conference call.
Cotsakos said E*Trade plans to build several "superstores" in the next two
years, including one on Madison Avenue in New York's Midtown district. He added
that these should not be viewed as brokerage branches but rather as investor
education centers with technology information and Web cast
ing products.
E*Trade is also establishing a brick and mortar presence through it's
acquisition of Card Capture Services, a network of over 8,500 ATM machines
across the U.S. and in three countries. E*Trade plans to develop a network of
financial services kiosks to deliver banking services as well as educational
services and investment tools. These are all steps in E*Trade's attempt to
diversify revenues and reduce their reliance on income from executing trades.
End
[slug: ETRADE-EARNS]
[symbols:US;EGRP]
Apr-12-2000 16:19 GMT
Symbols:
US;EGRP
Source [B] BridgeNews Global Markets
Categories:
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