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The Charles Schwab Corporation (SCHW) Up 22.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for The Charles Schwab Corporation (SCHW - Free Report) . Shares have added about 22.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is The Charles Schwab Corporation due for a pullback? 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 drivers.

Schwab Q2 Earnings Beat Estimates, Revenues Rise Y/Y

Schwab’s second-quarter 2022 adjusted earnings of 97 cents per share handily beat the Zacks Consensus Estimate of 91 cents. The bottom line also jumped 39% from the prior-year quarter.

Results gained from higher rates, which led to an increase in net interest income. Thus, revenues witnessed an improvement despite higher volatility hurting trading income. Also, lower fee waivers and growth in brokerage account numbers acted as tailwinds during the quarter. However, higher expenses were a headwind.

Results excluded acquisition and integration-related costs and amortization of acquired intangibles. After considering these, net income available to common shareholders (GAAP basis) was $1.79 billion or 87 cents per share, up from $1.27 billion or 59 cents per share in the year-ago quarter.

Revenues & Expenses Rise

Net revenues were $5.09 billion, which grew 13% year over year. The increase was mainly driven by a 31% surge in net interest income. The top line surpassed the Zacks Consensus Estimate of $5.04 billion.

Total non-interest expenses (GAAP basis) increased marginally to $2.82 billion. Excluding non-recurring items, expenses were $2.57 billion, up 2%.

The company recorded fee waivers of $3 million in the quarter compared with $85 million in the prior-year quarter.

Pre-tax profit margin increased to 44.6% from 38% in the prior-year quarter.

At the end of the second quarter, Schwab’s average interest-earning assets increased 18% year over year to $623.6 billion.

Annualized return on equity, as of Jun 30, 2022, was 19%, up from 10% in the prior-year quarter number.

Other Business Metrics

As of Jun 30, 2022, Schwab had total client assets of $6.83 trillion (down 10% year over year). In the reported quarter, net new assets, brought by new and existing clients, were $43.4 billion.

Schwab added 1 million new brokerage accounts in the quarter. As of Jun 30, 2022, the company had 33.9 million active brokerage accounts, 1.7 million banking accounts and 2.3 million corporate retirement plan participants.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, The Charles Schwab Corporation has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. 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.

Performance of an Industry Player

The Charles Schwab Corporation is part of the Zacks Financial - Investment Bank industry. Over the past month, Morgan Stanley (MS - Free Report) , a stock from the same industry, has gained 12.5%. The company reported its results for the quarter ended June 2022 more than a month ago.

Morgan Stanley reported revenues of $13.13 billion in the last reported quarter, representing a year-over-year change of -11%. EPS of $1.44 for the same period compares with $1.89 a year ago.

For the current quarter, Morgan Stanley is expected to post earnings of $1.55 per share, indicating a change of -24% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.6% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Morgan Stanley. Also, the stock has a VGM Score of D.


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