E*Trade Financial Corporation (NDAQ:ETFC) announced that its quarterly net income jumped 37% to a record $176.7 million in an 8K filing with the SEC today. The news comes after many other players in the brokerage industry have experienced similar successes, along with widespread gains in the overall financial industry. The company also reported revenues of $627 million with a profit margin of 43% - in line with last year. Chief Operating Office Jarrett Lilien commented on the results, saying that "all parts of the model performed well, with organic customer growth, more assets and cash coming in and more trading". The company said that it wants to attract more mass-affluent customers and expand internationally, opening the door to possible M&A activity. While the company's current forecasts of $1.65 to $1.80 are based on purely organic growth, they did not discount the possibility of utilizing acquisitions to reach its targets more quickly.

E*Trade Financial Corporation's principal activities are to provide differentiated trading, investing, banking and lending products, primarily through the Internet and other electronic media. It operates in two segments: The Brokerage segment provides services including automated order placement, execution of market and limit equity orders. It also includes access to nearly 5,000 non-proprietary and proprietary mutual funds; futures; bond trading and proprietary bond funds. It provides individual retirement accounts; college savings plan products; real-time market commentary and stock option plan administration products and services. The Banking segment provides consumer banking products and services. The lending services include first and second mortgage, refinance of existing mortgage and home equity loan.

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Ceridian Corporation (NYSE:CEN) shares moved up $1.36, or 4.85%, to $29.42 today on news that Bill Ackman's Pershing Square has taken a more activist stance in its investment. The 11.3% holder also disclosed a letter in their Schedule 13D filing with the SEC that expressed concern about a number of recent developments, particularly the departure of key Comdata personnel and a change in the company's strategic direction. Consequently, the hedge fund recommended that the company spin off Comdata to shareholders and focus on improving Ceridian's remarkably low margins, lackluster customer service, weak sales force, and poor technological infrastructure. Finally, Pershing Square announced their intention to nominate their own slate of directors to the company's board in order to enforce these changes and deliver shareholder value.

Why does a spin off of Comdata make sense for shareholders? Well, we must first remember that spin offs in general tend to outperform the overall market due to the way in which they are structured. Often times, parent company shareholders tend to immediately sell shares they are granted in the new spin off. Consequently, there is unjustified downside pressure on the new company's stock, which creates value for the enterprising investor. Aside from this fact, the separation of Comdata from Ceridian also makes a lot of sense. The two businesses share almost no synergies and are even located in different geographical locations. Moreover, Ceridian's poor performance has been a drag on Comdata's exemplary performance - a major contributing factor to Comdata's managements' possible departure from the company.

The spin off of Comdata would also provide Ceridian with a pile of cash that they could use to improve their own operations. The transaction would also allow Ceridian to unload some of its long-term debt on to the new entity (a common practice in spin off scenarios). Combined, the cash and savings generated from this transaction would allow Ceridian to institute changes aimed at improving the company's low margins, customer service, sales force, and technological infrastructure. Also, given Bill Ackman's history, he may decide to petition to the company to issue a special dividend to return some of this money to shareholders.

Overall, this is a great opportunity for investors to catch a ride with Bill Ackman, who is one of the most successful activist investors of our time; CEN is definitely a stock to watch as the January 23rd proxy deadline approaches.

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Pearson Plc (NYSE:PSO) moved up $0.79, or 5%, to $16.46 during the past two days on speculation that the company could be the target of a leveraged buyout. "The Business" fueled this speculation after reporting that private equity firm Kohlberg Kravis Roberts (KKR) was considering a $13.7 billion bid for the publishing company - a 4% premium to yesterday's close. However, Stifel Nicolaus discredited this rumor by stating: "Our SOTP analysis suggests the company can do better. Based on purchase price multiples involving comparable assets in recent transactions, we derive a fair value ranging from $17 at the low end to $23 at the high end. We would also note that according to the report, KKR has yet to make contact with Pearson, and thus Ј7 billion is merely a number at this point". Currently the company is trading below enterprise value with $1.59 per share in cash and very little debt. While this makes PSO an attractive takeover target, the company's PEG of 2.15 makes it somewhat overvalued. Regardless, this is definitely a stock worth watching.

Pearson plc. The Group's principal activity is providing information for the educational sector, consumer publishing and business information. It operates through its five business segments, School, Penguin, Higher Education, FT Publishing and IDC. Also, it has a business group, Professional. It brings together a number of education publishing, testing and services businesses.

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