A month has gone by since the last earnings report for The Charles Schwab Corporation (
SCHW Quick Quote SCHW - Free Report) . Shares have lost about 15.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is The Charles Schwab Corporation due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Schwab Q1 Earnings Miss Estimates, Costs Rise Y/Y
Schwab’s first-quarter 2022 adjusted earnings of 77 cents per share missed the Zacks Consensus Estimate of 85 cents. The bottom line declined 8% from the prior-year quarter.
Results were hurt by increased market volatility, thereby affecting trading income. Also, higher expenses were a headwind. However, lower fee waivers and growth in brokerage account number acted as tailwinds during the quarter. Results excluded acquisition and integration-related costs and amortization of acquired intangibles. After considering these, net income available to common shareholders (GAAP basis) was $1.28 billion or 67 cents per share, down from $1.39 billion or 73 cents per share in the year-ago quarter. Revenues Down, Expenses Rise
Net revenues were $4.67 billion, which declined 1% year over year. The fall was mainly due to lower trading revenues (down 21%). The top line missed the Zacks Consensus Estimate of $4.84 billion.
Total non-interest expenses (GAAP basis) increased 3% to $2.83 billion. Excluding non-recurring items, expenses were $2.58 billion, up 4%. The company recorded fee waivers of $54 million in the quarter compared with $78 million in the prior-year quarter. Pre-tax profit margin fell to 39.4% from 41.6% in the prior-year quarter. At the end of the first quarter, Schwab’s average interest-earning assets increased 22% year over year to $632.4 billion. Annualized return on equity, as of Mar 31, 2022, was 12%, on par with the prior-year quarter number. Other Business Metrics
As of Mar 31, 2022, Schwab had total client assets of $7.86 trillion (up 11% year over year). During the reported quarter, net new assets — brought by new and existing clients — were $120.5 billion.
Schwab added 1.2 million new brokerage accounts during the quarter. As of Mar 31, 2022, the company had 33.6 million active brokerage accounts, 1.6 million banking accounts and 2.2 million corporate retirement plan participants.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -8.67% due to these changes.
Currently, The Charles Schwab Corporation has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, The Charles Schwab Corporation has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.