TD Ameritrade Holding Corp. (NASDAQ: AMTD) has been caught up in much of the same malaise affecting other financial and brokerage firm stocks. The company posted a drop of more than 20% to its earnings this morning and gave lackluster guidance. But what is interesting is that late today Moody’s Investors Service raised its debt ratings on the company to investment grade.
Moody’s cited significant improvements to itsoperating fundamentals, particularly its ability to generate earningsas well as its profit margins. The new rating is Baa3. That is thelowest rung of "investment grade" at Moody’s, but an upgrade tonon-junk in this climate is one worth noting.
Ameritrade’s rating will remain consistent even if its pre-tax earnings are cut in half, which Moody’scalled an unlikely event. Moody’s also likes that Ameritrade getssupport via its close relationship with Toronto-Dominion Bank (NYSE:TD), which plans to raise its stake to 45% from 40%.
None of this is likely to fix the fact that financial stocks are in thetubes. But an upgrade in this climate is worth noting. An upgrade outof the junk department is worth even more.
Jon C. Ogg
January 20, 2009
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