We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Subdued Market Volatility to Hurt Schwab's (SCHW) Q4 Earnings
Read MoreHide Full Article
Charles Schwab (SCHW - Free Report) is scheduled to report fourth-quarter and full year 2023 results on Jan 17, before market open. Its revenues and earnings in the quarter are expected to have declined on a year-over-year basis.
In the third quarter of 2023, Schwab’s earnings beat the Zacks Consensus Estimate. Results benefited from the solid performance of the asset management business. However, a fall in revenues due to higher funding costs and lower volatility posed a major headwind.
The company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three and missed in one of the trailing four quarters.
The Charles Schwab Corporation Price and EPS Surprise
Schwab’s activities in the to-be-reported quarter did not encourage analysts to revise earnings estimates upward. In the past seven days, the Zacks Consensus Estimate for fourth-quarter earnings has been unchanged at 68 cents per share. The estimate indicates a decline of 36.5% from the year-ago quarter’s reported number. Our estimate for fourth-quarter earnings is pinned at 66 cents.
The consensus estimate for sales is pegged at $4.54 billion, which indicates a fall of 17.4% from the year-ago quarter’s reported figure. Our estimate for total revenues is pinned at $4.42 billion.
Before we take a look at what our quantitative model predicts, let’s check the factors that are likely to have impacted Schwab’s fourth-quarter performance.
Key Factors & Estimates for Q4
While the risk of a near-term recession faded in the fourth quarter, ambiguity among investors remained on lingering concerns related to high inflation and other geopolitical issues. Because of this, there was not much volatility seen in the markets. Client activity remained subdued, because of which, trading volumes were relatively low in the quarter.
In addition to these macro factors, Schwab’s trading performance is expected to have been impacted by the temporary attrition of TD Ameritrade clients and advisors.
In October and November, SCHW’s core net new assets declined 73% and 34% from the respective prior-year months. Thus, Schwab is expected to have witnessed a decline in trading revenues in the to-be-reported quarter.
The Zacks Consensus Estimate for trading revenues is pegged at $777 million, which suggests a decline of 13.2% from the prior-year quarter’s reported number. Our estimate for trading revenues is pinned at $724.8 million, indicating a decline of 19%.
Coming to net interest revenues, the consensus estimate for average interest-earning assets for the to-be-reported quarter is pegged at $440 billion, which suggests a decline of 17.4% from the prior-year quarter’s reported level.
While interest rates continued to remain high, the Federal Reserve paused rate hikes in December, indicating no further hikes this cycle. Thus, because of weaker loan demand, SCHW’s interest income is not expected to have improved much. Moreover, higher funding costs are likely to have put pressure on margin growth.
The Zacks Consensus Estimate for net interest revenues is pegged at $2.22 billion, which indicates a year-over-year decline of 26.7%. Our estimate for the metric is $2.29 billion.
Nevertheless, the consensus estimate for Schwab’s asset management and administration fees of $1.25 billion implies a rise of 18.9% from the prior-year quarter’s reported number. We project the metric to rise 1.8% to $1.07 billion.
Because of lower transactional cash levels, subdued client trading volumes and muted securities lending activity, the company expects 2023 revenues to decline 9.5-10% year over year, changed from the previously mentioned 8-9% fall.
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. We project total expenses of $3.05 billion for the quarter, implying a rise of 5.2% from the year-ago quarter’s reported figure.
Management expects one-time FDIC special assessment costs to impact GAAP and adjusted expenses by $160 million in the fourth quarter. Thus, 2023 GAAP expense growth of 9% and adjusted expense growth of 6% are expected.
What the Zacks Model Unveils
According to our quantitative model, the chances of Schwab beating the Zacks Consensus Estimate for earnings 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 -2.91%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Stocks Worth a Look
Here are a couple of bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time:
The Earnings ESP for U.S. Bancorp (USB - Free Report) is +1.75% and it carries a Zacks Rank #3 at present. The company is slated to report fourth-quarter and full-year 2023 results on Jan 17.
Over the past seven days, the Zacks Consensus Estimate for USB’s quarterly earnings has remained unchanged at 99 cents.
Image: Bigstock
Subdued Market Volatility to Hurt Schwab's (SCHW) Q4 Earnings
Charles Schwab (SCHW - Free Report) is scheduled to report fourth-quarter and full year 2023 results on Jan 17, before market open. Its revenues and earnings in the quarter are expected to have declined on a year-over-year basis.
In the third quarter of 2023, Schwab’s earnings beat the Zacks Consensus Estimate. Results benefited from the solid performance of the asset management business. However, a fall in revenues due to higher funding costs and lower volatility posed a major headwind.
The company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three and missed in one 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 did not encourage analysts to revise earnings estimates upward. In the past seven days, the Zacks Consensus Estimate for fourth-quarter earnings has been unchanged at 68 cents per share. The estimate indicates a decline of 36.5% from the year-ago quarter’s reported number. Our estimate for fourth-quarter earnings is pinned at 66 cents.
The consensus estimate for sales is pegged at $4.54 billion, which indicates a fall of 17.4% from the year-ago quarter’s reported figure. Our estimate for total revenues is pinned at $4.42 billion.
Before we take a look at what our quantitative model predicts, let’s check the factors that are likely to have impacted Schwab’s fourth-quarter performance.
Key Factors & Estimates for Q4
While the risk of a near-term recession faded in the fourth quarter, ambiguity among investors remained on lingering concerns related to high inflation and other geopolitical issues. Because of this, there was not much volatility seen in the markets. Client activity remained subdued, because of which, trading volumes were relatively low in the quarter.
In addition to these macro factors, Schwab’s trading performance is expected to have been impacted by the temporary attrition of TD Ameritrade clients and advisors.
In October and November, SCHW’s core net new assets declined 73% and 34% from the respective prior-year months. Thus, Schwab is expected to have witnessed a decline in trading revenues in the to-be-reported quarter.
The Zacks Consensus Estimate for trading revenues is pegged at $777 million, which suggests a decline of 13.2% from the prior-year quarter’s reported number. Our estimate for trading revenues is pinned at $724.8 million, indicating a decline of 19%.
Coming to net interest revenues, the consensus estimate for average interest-earning assets for the to-be-reported quarter is pegged at $440 billion, which suggests a decline of 17.4% from the prior-year quarter’s reported level.
While interest rates continued to remain high, the Federal Reserve paused rate hikes in December, indicating no further hikes this cycle. Thus, because of weaker loan demand, SCHW’s interest income is not expected to have improved much. Moreover, higher funding costs are likely to have put pressure on margin growth.
The Zacks Consensus Estimate for net interest revenues is pegged at $2.22 billion, which indicates a year-over-year decline of 26.7%. Our estimate for the metric is $2.29 billion.
Nevertheless, the consensus estimate for Schwab’s asset management and administration fees of $1.25 billion implies a rise of 18.9% from the prior-year quarter’s reported number. We project the metric to rise 1.8% to $1.07 billion.
Because of lower transactional cash levels, subdued client trading volumes and muted securities lending activity, the company expects 2023 revenues to decline 9.5-10% year over year, changed from the previously mentioned 8-9% fall.
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. We project total expenses of $3.05 billion for the quarter, implying a rise of 5.2% from the year-ago quarter’s reported figure.
Management expects one-time FDIC special assessment costs to impact GAAP and adjusted expenses by $160 million in the fourth quarter. Thus, 2023 GAAP expense growth of 9% and adjusted expense growth of 6% are expected.
What the Zacks Model Unveils
According to our quantitative model, the chances of Schwab beating the Zacks Consensus Estimate for earnings 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 -2.91%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Stocks Worth a Look
Here are a couple of bank stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time:
The Earnings ESP for U.S. Bancorp (USB - Free Report) is +1.75% and it carries a Zacks Rank #3 at present. The company is slated to report fourth-quarter and full-year 2023 results on Jan 17.
Over the past seven days, the Zacks Consensus Estimate for USB’s quarterly earnings has remained unchanged at 99 cents.
M&T Bank (MTB - Free Report) is scheduled to release fourth-quarter and full-year 2023 earnings on Jan 18. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +1.01%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
MTB’s quarterly earnings estimates have moved almost 1% lower over the past week to $3.70.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.