TD Stock: What Investors Should Take Away From Earnings

TD stock (TSX:TD) has a long history of growth and stability, yet concerns were raised after its most recent earnings report.

| More on:

Canadian banks have long been considered strong investments during market downturns, thanks to their stability and resilience. However, the current economic landscape presents unique challenges. In this article, we delve into Toronto Dominion Bank (TSX:TD) after its earnings report. As one of Canada’s largest banks, we’ll determine whether it remains an attractive option for investors.

A history of growth and stability

TD stock has a rich history dating back to 1855. Over the years, it has evolved into a diversified financial institution, offering a wide range of banking, wealth management, and insurance services. TD stock has been a reliable choice for investors, with impressive share growth of 76% in the last decade, resulting in a compound annual growth rate (CAGR) of approximately 6.1%.

Several factors have contributed to this growth. This includes TD’s expansion into the United State’s market, robust asset management, and prudent risk management practices. The bank’s ability to navigate economic uncertainties has also played a pivotal role in its consistent performance.

Third-quarter sees overall drop

TD recently released its third-quarter financial highlights, which are crucial for evaluating its current investment potential. Reported diluted earnings per share decreased from $1.75 to $1.57 compared to the same period last year. Adjusted diluted earnings per share also saw a decline from $2.09 to $1.99.

Year to date, the picture is similar, with reported diluted earnings per share at $4.11, compared to $5.85 in the previous year. Adjusted diluted earnings per share remained relatively stable at $6.16, compared to $6.18.

The earnings report revealed some noteworthy items of adjustment, including acquisition-related charges and amortization of acquired intangibles. These factors have contributed to the decline in reported earnings.

However, it’s important to consider the broader context. TD stock’s diversified business model has helped it weather challenging economic conditions before. Further, its commitment to delivering exceptional experiences to its 27 million customers remains unwavering.

Analysts dig in

Analysts have offered varying perspectives on TD stock’s current situation. Some expressed concerns about weaker-than-expected results, primarily driven by higher insurance claims in the wealth management and insurance segments. Nevertheless, they anticipate these claims will normalize in the future.

One positive development is TD stock’s plan to repurchase 90 million shares, a significant increase from its previous buyback program. This move is seen as a positive step, as it indicates the bank’s willingness to return capital to shareholders, which may offset some of the challenges it faces.

The potential impact of this buyback is substantial. If all 90 million shares are repurchased, TD stock could have significant excess capital, even after maintaining a robust capital ratio. This could potentially boost earnings per share in the coming years.

Bottom line

So, is TD Stock a strong or weak buy? Considering its 4.61% dividend yield and 10.5 price-to-earnings (P/E) ratio, it remains an attractive option for income-focused investors. While recent earnings may raise some concerns, the bank’s overall stability and commitment to returning capital to shareholders should not be overlooked.

Investors should approach TD stock with a long-term perspective, understanding that market fluctuations are part of the journey. The bank’s strong presence in both Canada and the U.S., coupled with its willingness to adapt to changing economic conditions, positions it well for future growth.

In conclusion, TD stock may have faced headwinds in recent times, but it continues to offer a compelling investment opportunity. Especially for those seeking dividend income and long-term growth potential. As always, it’s essential for investors to conduct their own research and consult with financial advisors before making any investment decisions.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in Toronto-Dominion Bank. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy

More on Stocks for Beginners

Map of Canada showing connectivity
Dividend Stocks

Trump’s Tariffs: 1 Canadian Stock to Dump and 1 to Buy Immediately

As Trump threatens tariffs on Canada, these are two top stocks to watch.

Read more »

monthly desk calendar
Dividend Stocks

Top Canadian Stocks to Buy for Monthly Income

Looking for some stocks to buy for monthly income? Here's a pair of great stocks that can provide both income…

Read more »

space ship model takes off
Stocks for Beginners

TSX on the Rise: 2 Momentum Stocks to Buy Immediately

Here’s why now could be the perfect time to invest in these surging momentum stocks on the TSX.

Read more »

Investor reading the newspaper
Stocks for Beginners

Invest for Tomorrow: 3 TSX Stocks to Build Lasting Wealth

Investors looking to build lasting wealth should have plenty of options to consider. Here are three great stocks to start.

Read more »

grow money, wealth build
Dividend Stocks

Got $10,000? Buy This Canadian Stock and Earn During Trump’s Trade War

Not all Canadian stocks are doomed to failure, and this one could in fact provide some serious protection.

Read more »

Rocket lift off through the clouds
Stocks for Beginners

1 Canadian Stock Set to Skyrocket as Trump’s Trade War Heats Up

This one Canadian stock is set to skyrocket, even amidst US tariffs.

Read more »

space ship model takes off
Stocks for Beginners

2 Unstoppable TSX Stocks to Buy in 2025 and Hold Forever

Despite the ongoing trade tensions, you may want to consider buying these two reliable TSX stocks now and hold them…

Read more »

Happy golf player walks the course
Dividend Stocks

Invest $15,000 in These 2 Canadian Stocks to Profit From Trump’s Tariffs

Trump tariffs are underway, but you can profit by investing in these Canadian stocks.

Read more »