UPDATE E*Trade wants Wall Street to lower its expectations for the next two years as the company shifts focus away from adding new customers to making more money from existing ones.
In a Tuesday conference call with analysts, executives for the provider of brokerage and other financial services said their company is planning for 2001 earnings ranging from 0 cents to 5 cents per share, on revenue of $1 billion to $1.2 billion. Analyst consensus was predicting a 2001 profit of 13 cents per share on revenue $1.4 billion, according to earnings tracking firm First Call.
"We're going to be very conservative with our numbers," E*Trade CEO Christos Cotsakos told analysts. "We're going to manage to minimize any downside risk."
Shares of E*Trade (NYSE: ET) were unchanged in after-hours activity on the Island ECN following the conference call. E*Trade rose $1.32 to $7.55 in Tuesday's regular trading ahead of the news.
E*Trade forecast a 2002 profit of 20 cents to 30 cents per share, on revenue of $1.2 billion to $1.4 billion. First Call consensus was calling for 2002 earnings of 31 cents per share on revenue of $1.7 billion.
The company could top its new projections for 2001 and 2002 if the economy improves more quickly than expected, said Leonard Purkis, chief financial officer. However, company executives cautioned that they don't expect the economic picture to become clearer until this fall.
Because of the weak economy, E*Trade will pull back on getting new customers. "The landgrab in the broker category is on hiatus," Cotsakos said.
The company will concentrate on selling more services to its current customer base, executives said. E*Trade, which ended March with more than 3.7 million accounts, over the past few years has added banking, insurance and other financial offerings to its core brokerage business. New customers being added generally are more educated and sophisticated, and generate more revenue for E*Trade, said Cotsakos, who touted the benefits of a "deeper, more profitable, symbiotic relationships" with customers.
Analysts want to see more from E*Trade's new products, such as more banking services and programs for active traders.
"At this point, we believe that demonstrating its ability to execute on these initiatives is important for E*Trade," J.P. Morgan Securities analyst Gregory Smith wrote in a research note released ahead of E*Trade's report.
Also Tuesday, E*Trade reported first-quarter net income of $868,000, or breakeven on a per-share basis, excluding special items. E*Trade (NYSE: ET) posted first-quarter revenue of $330 million, down 21 percent year-over-year, but more than the $319.5 million predicted by First Call's survey of analysts.
Including goodwill write-downs, investment gains and losses and other charges, E*Trade lost $7.2 million, or 2 cents per share for the first quarter, which ended March 31.
E*Trade added 116,112 new accounts to end the March quarter with 3.7 million total accounts. Transaction revenue fell 14 percent from the fourth quarter. The volume of transactions slid 9 percent over the same period.
Banking customers of E*Trade added more than $500 million in deposits during the quarter as the company focused on cross-selling between the brokerage and banking units.
Unlike other online brokerages such as Ameritrade (Nasdaq: AMTD) and CSFBDirect (NYSE: DIR), which have cut staff recently in response to a slowdown in stock trading as the market has declined over the last several months, E*Trade has not announced any major reductions.
But the company does plan to cut costs in many ways as it finishes integrating its stream of acquisitions--11 in the last 18 months. The effect of those measures won't be felt on the bottom line until late this year at the earliest, executives said.
"We feel we're in a position of strength as we confront the challenges ahead of us," Cotsakos said. "We are not going to spend one dollar unproductively or foolishly.">