Shares of Toronto Dominion Bank (TSX:TD) have taken a hit in recent days after the bank came out with weak earnings. The bank has gone through lay offs, but there could be more rough waters ahead. So today, let’s look at whether this means today’s investor can get a deal, or should they sell shares off in bulk?
What happened
TD stock reported its fourth-quarter profit was lower than analyst estimates during its earnings release, coming with a huge job cut as well. The stock earned $2.9 billion for the quarter, a massive 57% reduction compared to the year before. TD stock also reported $266 million in after-tax restructuring charges as large lay offs were made in an attempt to bring down costs.
The bank also set aside $878 million in provisions for credit losses to cover loans that may go into default. This could be a huge problem for TD stock, given it offers out loans for pretty much any one. However, this was lower than analysts previously thought, including $159 million set aside against loans that are already being repaid.
But across the board, everything else was down. Revenue fell 16%, expenses were up 20%, and profit was down 1% in Canada and 17% in the United States. There was also a massive 93% fall in capital markets profit to just $17 million as TD stock took over the Cowen investment bank.
Analysts weigh in
The quarter of course saw its fair share of analysts weighing in on TD stock and its results. For the bank, analysts predict that expenses will continue to rise in 2024, even compared to its peers. Even with savings on the books for the future, expense growth will likely outweigh any savings put aside for the stock.
This would include its U.S. branches, which look like they could have more soft quarters to come. Instead, it could last until 2025 before we see TD stock return to the growth investors have enjoyed in the past. So with higher expenses coming in, most analysts reduced price targets for the stock.
So long term we have expenses. But short term we have issues coming in from the U.S. The company will likely continue to see uncertainty and fee revenue drop as retail locations in the U.S. continue to be an issue.
Buy, sell, or hold?
Here’s the thing. When it comes to investing, it shouldn’t be based on the ups and downs of the day. TD stock is a prime example of this. The stock is certainly looking to have a rough two years in the future, that cannot be denied. And if you’re looking to take out your cash in that time, I would say it’s a strong “hold.”
But as for selling or buying, first off I’m pretty much against selling any stock until you’ve recovered losses. As for buying, TD stock could be a great stock to buy if you’re looking to hold it for another decade. After all, look to the past for proof of success! TD stock has come back from the Great Recession of 2008 to become stronger than ever. Now it’s struggling, but that struggle should turn around in the next year, leaving you with a great deal today.
Meanwhile, shares trade at just 14.4 times earnings and 2.8 times sales, with shares down 8% in the last year. It now offers a 4.96% dividend yield, which is higher than it’s five-year average of 4.09% as well. So does TD stock look weak right now? Absolutely. But if you’re a long-term investor, it’s still a solid choice for your portfolio today.
