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4 Reasons to Add Schwab Stock to Your Portfolio Right Now
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Finance sector stocks, which have been off investors’ radar for quite some time now, seems to be regaining strength. With higher chances of the Fed raising rates next month, finance stocks are expected to witness improvement in revenues in the quarters ahead.
Today we are discussing investment brokerage firm The Charles Schwab Corporation (SCHW - Free Report) , which has been gaining strength since the Fed’s decision to increase rates last year. Given its highly rate-sensitive business model, the company is well-positioned to thrive in a rising rate environment.
Over the past one year, this Zacks Rank #2 (Buy) stock has gained 13.1% compared with a 4.9% improvement in S&P 500 and 6.4% growth in the Zacks categorized Investment Brokers industry.
Rising Rates to Favor Revenue Improvement: Schwab’s all three revenue components, namely, Asset management and administration fees, net interest revenue and trading revenue are likely to see a rise on the back of a favorable interest rate environment.
Management does not expect a significant impact of the rate hike next month on its financials, perhaps owing to a year-over-year fall in long-term interest rates. However, we believe rising rates will lead to a further decline in management fee-waivers. The company has recorded a substantial decrease in fee waivers in the first nine months of 2016 (primarily driven by the Dec 2015 rate hike).
Moreover, further rise in rates is expected to lead to a notable improvement in net new assets and total client asset balances. Also, enhanced client confidence is expected to bring about a rebound in trading revenues. These are likely to bolster non-interest revenues at Schwab.
For 2016, projected sales growth for Schwab is 16.8% compared with nil for the industry.
Earnings per Share: Schwab is expected to deliver strong earnings performance in the near term as indicated by the company’s projected EPS growth (F1/F0) of 33.5% compared with a decline of 2.3% for the industry.
In addition, the company’s long-term (3–5 years) estimated EPS growth rate of 17% (compared with the industry growth rate of 14.8%) promises rewards for investors over the long run.
Superior Return on Equity: Schwab’s ROE of 9.68%, as compared with the industry average of 9.09%, reflects the company’s commendable position among its peers.
Upward Earnings Estimate Revisions: Over the past 60 days, the company has seen 11 upward estimate revisions, while no estimate has been revised lower for 2016. For 2017, the stock is seeing a ratio of 8:1 in terms of up and down revisions.
The Zacks Consensus Estimate for 2016 increased 2.4% to $1.29 per share in the past month; while that for 2017 has risen 3.3% to $1.56 per share during the same period.
Other Investment Brokers Worth a Look
Apart from Schwab, you can consider other investment brokerage firms including Stifel Financial Corp. (SF - Free Report) , E*TRADE Financial Corp. and Evercore Partners Inc. (EVR - Free Report) .
Stifel Financial witnessed an upward earnings estimate revision of 8.9% over the past 60 days. Also, its share price is up 16.1% year to date. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
E*TRADE currently carries a Zacks Rank #2. It has witnessed an upward earnings estimate revision of 5.9% over the past 60 days and its share price is up nearly 15% year to date.
Evercore Partners also carries a Zacks Rank #2 and has witnessed an upward earnings estimate revision of 4% over the past 60 days. Its share price has risen 23.5% year to date.
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4 Reasons to Add Schwab Stock to Your Portfolio Right Now
Finance sector stocks, which have been off investors’ radar for quite some time now, seems to be regaining strength. With higher chances of the Fed raising rates next month, finance stocks are expected to witness improvement in revenues in the quarters ahead.
Today we are discussing investment brokerage firm The Charles Schwab Corporation (SCHW - Free Report) , which has been gaining strength since the Fed’s decision to increase rates last year. Given its highly rate-sensitive business model, the company is well-positioned to thrive in a rising rate environment.
Over the past one year, this Zacks Rank #2 (Buy) stock has gained 13.1% compared with a 4.9% improvement in S&P 500 and 6.4% growth in the Zacks categorized Investment Brokers industry.
SCHWAB(CHAS) Price
SCHWAB(CHAS) Price | SCHWAB(CHAS) Quote
Here’s Why Schwab Is an Attractive Choice
Rising Rates to Favor Revenue Improvement: Schwab’s all three revenue components, namely, Asset management and administration fees, net interest revenue and trading revenue are likely to see a rise on the back of a favorable interest rate environment.
Management does not expect a significant impact of the rate hike next month on its financials, perhaps owing to a year-over-year fall in long-term interest rates. However, we believe rising rates will lead to a further decline in management fee-waivers. The company has recorded a substantial decrease in fee waivers in the first nine months of 2016 (primarily driven by the Dec 2015 rate hike).
Moreover, further rise in rates is expected to lead to a notable improvement in net new assets and total client asset balances. Also, enhanced client confidence is expected to bring about a rebound in trading revenues. These are likely to bolster non-interest revenues at Schwab.
For 2016, projected sales growth for Schwab is 16.8% compared with nil for the industry.
Earnings per Share: Schwab is expected to deliver strong earnings performance in the near term as indicated by the company’s projected EPS growth (F1/F0) of 33.5% compared with a decline of 2.3% for the industry.
In addition, the company’s long-term (3–5 years) estimated EPS growth rate of 17% (compared with the industry growth rate of 14.8%) promises rewards for investors over the long run.
Superior Return on Equity: Schwab’s ROE of 9.68%, as compared with the industry average of 9.09%, reflects the company’s commendable position among its peers.
Upward Earnings Estimate Revisions: Over the past 60 days, the company has seen 11 upward estimate revisions, while no estimate has been revised lower for 2016. For 2017, the stock is seeing a ratio of 8:1 in terms of up and down revisions.
The Zacks Consensus Estimate for 2016 increased 2.4% to $1.29 per share in the past month; while that for 2017 has risen 3.3% to $1.56 per share during the same period.
Other Investment Brokers Worth a Look
Apart from Schwab, you can consider other investment brokerage firms including Stifel Financial Corp. (SF - Free Report) , E*TRADE Financial Corp. and Evercore Partners Inc. (EVR - Free Report) .
Stifel Financial witnessed an upward earnings estimate revision of 8.9% over the past 60 days. Also, its share price is up 16.1% year to date. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
E*TRADE currently carries a Zacks Rank #2. It has witnessed an upward earnings estimate revision of 5.9% over the past 60 days and its share price is up nearly 15% year to date.
Evercore Partners also carries a Zacks Rank #2 and has witnessed an upward earnings estimate revision of 4% over the past 60 days. Its share price has risen 23.5% year to date.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>