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Trading Business, Higher Rates to Aid Schwab (SCHW) Q2 Earnings
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Charles Schwab (SCHW - Free Report) is scheduled to report second-quarter 2022 results on Jul 18, before market open. Its revenues and earnings in the quarter are expected to have improved on a year-over-year basis.
In first-quarter 2022, Schwab’s earnings missed the Zacks Consensus Estimate. Results were hurt by higher expenses. However, lower fee waivers and growth in brokerage account numbers acted as tailwinds.
The company does not have an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in two and lagged in two of the trailing four quarters.
The Charles Schwab Corporation Price and EPS Surprise
Schwab’s activities in the to-be-reported quarter encouraged analysts to revise earnings estimates upward. In the past 30 days, the Zacks Consensus Estimate for SCHW’s second-quarter earnings has been revised 1.1% higher to 92 cents. The estimate indicates an increase of 31.4% from the year-ago quarter’s reported number.
The consensus estimate for second-quarter sales is pegged at $5.04 billion, which suggests an increase of 11.4% from the year-ago quarter’s reported figure.
Before we take a look at what our quantitative model predicts, let’s check the factors that are likely to have impacted Schwab’s second-quarter performance.
Key Factors & Estimates for Q2
After witnessing the gradual normalization in the second half of 2021, trading activities surprisingly rebounded in the first quarter of 2022, with the trend continuing into the second quarter. The Russia-Ukraine conflict continued to disrupt supply chains, leading to global ambiguity. Further, fears of an economic slowdown, 40-year-high inflation numbers and rising interest rates worldwide resulted in heightened client activities and increased trading volumes.
These factors led to higher volatility in the equity markets (with the S&P 500 Index recording the worst first-half performance in more than 50 years) and other asset classes, including bonds, commodities and foreign exchange.
Driven by the rise in volatility, investors seemed somewhat interested in entering the markets.
In April, SCHW opened 386,000 new brokerage accounts. In May, brokerage accounts opened were 323,000.
Thus, supported by the increase in volatility and client activity, Schwab’s trading revenues are expected to have improved in the quarter under review.
The Zacks Consensus Estimate for second-quarter trading revenues is pegged at $1.39 billion, which suggests a rise of 45.3% from the prior-year quarter’s reported number.
Management expects second-quarter 2022 revenues will rise 7.5-8.5% on a sequential basis, “to the extent equity market valuations, client trading activity, and margin loan utilization remain at early June levels.”
The consensus estimate for total client assets for the second quarter is pegged at $7.6 trillion, which indicates a marginal year-over-year rise. Moreover, the consensus estimate for average interest-earning assets of $625 billion suggests growth of 16.6% from the prior-year quarter’s reported level.
Thus, Schwab’s net interest revenues are likely to have been positively impacted by growth in interest-earning assets and the hike in interest rates. The Zacks Consensus Estimate for net interest revenues is pegged at $2.49 billion, which suggests a year-over-year rise of 27.6%.
The consensus estimate for asset management and administration fees of $1.09 billion suggests a year-over-year rise of 4.5%.
Coming to expenses, Schwab’s operating expenses have been elevated in the past few quarters. Due to the persistent regulatory spending and strategic buyouts to drive efficiency, overall expenses are expected to have been high in the to-be-reported quarter.
What the Zacks Model Unveils
According to our quantitative model, the chances of Schwab beating the Zacks Consensus Estimate this time are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Schwab is -2.33%.
Zacks Rank: The company currently carries a Zacks Rank #3.
A few finance stocks, which you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Truist Financial (TFC - Free Report) and Capital One Financial (COF - Free Report) .
The Earnings ESP for Truist Financial is +0.68% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2022 results on Jul 19.
Capital One is scheduled to release second-quarter 2022 earnings on Jul 21. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.04%.
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Trading Business, Higher Rates to Aid Schwab (SCHW) Q2 Earnings
Charles Schwab (SCHW - Free Report) is scheduled to report second-quarter 2022 results on Jul 18, before market open. Its revenues and earnings in the quarter are expected to have improved on a year-over-year basis.
In first-quarter 2022, Schwab’s earnings missed the Zacks Consensus Estimate. Results were hurt by higher expenses. However, lower fee waivers and growth in brokerage account numbers acted as tailwinds.
The company does not have an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in two and lagged in two of the trailing four quarters.
The Charles Schwab Corporation Price and EPS Surprise
The Charles Schwab Corporation price-eps-surprise | The Charles Schwab Corporation Quote
Schwab’s activities in the to-be-reported quarter encouraged analysts to revise earnings estimates upward. In the past 30 days, the Zacks Consensus Estimate for SCHW’s second-quarter earnings has been revised 1.1% higher to 92 cents. The estimate indicates an increase of 31.4% from the year-ago quarter’s reported number.
The consensus estimate for second-quarter sales is pegged at $5.04 billion, which suggests an increase of 11.4% from the year-ago quarter’s reported figure.
Before we take a look at what our quantitative model predicts, let’s check the factors that are likely to have impacted Schwab’s second-quarter performance.
Key Factors & Estimates for Q2
After witnessing the gradual normalization in the second half of 2021, trading activities surprisingly rebounded in the first quarter of 2022, with the trend continuing into the second quarter. The Russia-Ukraine conflict continued to disrupt supply chains, leading to global ambiguity. Further, fears of an economic slowdown, 40-year-high inflation numbers and rising interest rates worldwide resulted in heightened client activities and increased trading volumes.
These factors led to higher volatility in the equity markets (with the S&P 500 Index recording the worst first-half performance in more than 50 years) and other asset classes, including bonds, commodities and foreign exchange.
Driven by the rise in volatility, investors seemed somewhat interested in entering the markets.
In April, SCHW opened 386,000 new brokerage accounts. In May, brokerage accounts opened were 323,000.
Thus, supported by the increase in volatility and client activity, Schwab’s trading revenues are expected to have improved in the quarter under review.
The Zacks Consensus Estimate for second-quarter trading revenues is pegged at $1.39 billion, which suggests a rise of 45.3% from the prior-year quarter’s reported number.
Management expects second-quarter 2022 revenues will rise 7.5-8.5% on a sequential basis, “to the extent equity market valuations, client trading activity, and margin loan utilization remain at early June levels.”
The consensus estimate for total client assets for the second quarter is pegged at $7.6 trillion, which indicates a marginal year-over-year rise. Moreover, the consensus estimate for average interest-earning assets of $625 billion suggests growth of 16.6% from the prior-year quarter’s reported level.
Thus, Schwab’s net interest revenues are likely to have been positively impacted by growth in interest-earning assets and the hike in interest rates. The Zacks Consensus Estimate for net interest revenues is pegged at $2.49 billion, which suggests a year-over-year rise of 27.6%.
The consensus estimate for asset management and administration fees of $1.09 billion suggests a year-over-year rise of 4.5%.
Coming to expenses, Schwab’s operating expenses have been elevated in the past few quarters. Due to the persistent regulatory spending and strategic buyouts to drive efficiency, overall expenses are expected to have been high in the to-be-reported quarter.
What the Zacks Model Unveils
According to our quantitative model, the chances of Schwab beating the Zacks Consensus Estimate this time are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Schwab is -2.33%.
Zacks Rank: The company currently carries a Zacks Rank #3.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks Worth a Look
A few finance stocks, which you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Truist Financial (TFC - Free Report) and Capital One Financial (COF - Free Report) .
The Earnings ESP for Truist Financial is +0.68% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2022 results on Jul 19.
Capital One is scheduled to release second-quarter 2022 earnings on Jul 21. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.04%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.