The Toronto-Dominion Financial institution (TSX:TD) simply launched its earnings launch for the fiscal fourth quarter ended October 31. The outcomes beat expectations on each the highest line and the underside line. The financial institution elevated its dividend by 2.9% after they got here out. Buyers took effectively to TD’s fourth quarter earnings launch, sending the fill up 1.5% within the hours instantly after the discharge got here out.
For me, this was all just about anticipated. I’d been bullish on TD Financial institution all 12 months lengthy, having purchased some shares at $78 late final 12 months and one other lot at $82 earlier this 12 months. I additionally shared my bullishness on TD inventory extensively right here on Motley Idiot. Each buys labored out effectively for me and outperformed the market. Presumably, a few of my readers shared within the positive factors.
On this article, I’ll discover TD Financial institution’s fourth quarter earnings beat and what it means for traders.
Earnings recap
In its fourth quarter earnings launch, TD revealed excessive progress and profitability throughout the board, exceeding expectations on all fronts. Some spotlight metrics included:
- $16 billion in adjusted income, up 7.5%.
- $15.5 billion in reported income, down lower than 1%.
- $2.19 in adjusted earnings per share (EPS), up 26.7%.
- $1.82 in reported EPS, down 7.6%.
- Some lingering bills from the profitable Cowen deal and the failed First Horizon deal, each fairly negligible.
- A 14.7% widespread fairness tier 1 (CET1) ratio, improved from 13.1%.
- A dividend hike from $1.05 per share to $1.08 per share (quarterly, so the brand new annual quantity is $4.32).
- A goal of 6%–8% EPS progress for 2026.
It’s exhausting to overstate how a lot issues have improved from this time final 12 months. In December of 2024, the U.S. Division of Justice (DoJ) introduced that TD was being fined $3 billion and having its U.S. retail section property capped at $430 billion. Buyers have been promoting TD inventory en masse, and the corporate was warning of no progress for 2025. Ultimately, TD ended up reaching important income progress in 2025. Now, it’s guiding for progress within the 6% to eight% vary in 2026. Good!
What to do with TD inventory now
It’s good to know that TD simply put out an excellent quarter. Nonetheless, the markets reacted to the discharge swiftly, sending TD inventory hovering. Given this, is TD inventory a purchase?
Truthfully, I nonetheless assume that TD is a reasonably smart portfolio holding. Nonetheless, it’s clearly not going to repeat its good 2025 efficiency once more in 2026. I’m not planning on shopping for extra TD inventory right here. However take into account this:
- TD nonetheless trades at simply 10 instances reported earnings.
- Its P/E ratio going by adjusted earnings – 13.8 – is far decrease than the common for the TSX.
- Many sectors resembling telcos and utilities commerce at over 20 instances earnings immediately whereas rising much less and being much less worthwhile than TD financial institution.
It’s regular for financial institution shares to commerce at decrease multiples than different sectors, as a result of banking is a extremely regulated, asset heavy trade with low anticipated progress. Nonetheless, we have now TD Financial institution right here buying and selling at 10 to 13.8 instances earnings whereas rising fairly a bit, and anticipating to develop extra sooner or later. I’d somewhat personal this than most of what’s floating across the TSX telco and utilities sectors, in addition to different banks.
Silly takeaway
Within the fourth quarter, TD Financial institution once more proved that it could actually do the not possible: develop its earnings whereas having one hand tied behind its again. The asset cap on TD’s U.S. retail financial institution is a serious handicap, but the financial institution continues to be rising and beating the market. In my opinion, it’s nonetheless an “OK” maintain.
