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Lower Market Volatility to Hurt Schwab's (SCHW) Q1 Earnings
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Charles Schwab (SCHW - Free Report) is scheduled to report first-quarter 2024 results on Apr 15, before market open. Its revenues and earnings in the quarter are expected to have declined on a year-over-year basis.
In the fourth quarter of 2023, Schwab’s earnings beat the Zacks Consensus Estimate. Results benefited from the solid performance of the asset management business. Also, the absence of fee waivers and solid brokerage account numbers acted as tailwinds. 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 each 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 SCHW’s first-quarter earnings has been unchanged at 74 cents per share. The estimate indicates a decline of 20.4% from the year-ago quarter’s reported number.
The consensus estimate for sales is pegged at $4.72 billion, which indicates a fall of 7.8% from the year-ago quarter’s reported figure.
Management projects first-quarter 2024 revenues to grow 5-6% on a sequential basis.
Before we take a look at what our quantitative model predicts, let us check the factors that are likely to have impacted Schwab’s first-quarter performance.
Key Factors & Estimates for Q1
Client activity was decent in the first quarter. The expectation of a soft landing of the U.S. economy, the gradual cooling down of inflation and clarity on the Fed rate path drove client activity. However, volatility was lower in the equity markets and other asset classes, including commodities, bonds and foreign exchange.
In January and February, SCHW’s core net new assets declined 52% and 20% from the respective prior-year months. Thus, Schwab is not expected to have witnessed a rise in trading revenues in the to-be-reported quarter.
The Zacks Consensus Estimate for first-quarter trading revenues is pegged at $827 million, which suggests a decline of 7.3% from the prior-year quarter’s reported number. Our estimate for trading revenues is pinned at $822.8 million, indicating a decline of 7.8%.
Coming to net interest revenues, the consensus estimate for SCHW’s average interest-earning assets for the to-be-reported quarter is pegged at $437 billion, which suggests a decline of 13.5% from the prior-year quarter’s reported level.
The Federal Reserve kept interest rates steady during the quarter (at a 22-year high of 5.25-5.5%). Despite higher rates, SCHW is not expected to have recorded significant improvement in net interest revenues because of higher funding costs and relatively weak loan demand.
The Zacks Consensus Estimate for first-quarter net interest revenues is pegged at $2.23 billion, which indicates a year-over-year decline of 19.5%. Our estimate for the metric is $2.29 billion.
Nevertheless, the consensus estimate for SCHW’s asset management and administration fees of $1.31 billion implies a rise of 17.1% from the prior-year quarter’s reported number. We also project the metric to rise to $1.31 billion.
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 billion for the quarter.
What the Zacks Model Unveils
According to our quantitative model, the chances of Schwab beating the Zacks Consensus Estimate for earnings this time are high. This is because it has 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 +0.30%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Other Stocks Worth a Look
A few other finance stocks that you may want to consider, as these too have the right combination of elements to post an earnings beat in their upcoming releases per our model, are PNC Financial (PNC - Free Report) and Truist Financial Corporation (TFC - Free Report) .
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Lower Market Volatility to Hurt Schwab's (SCHW) Q1 Earnings
Charles Schwab (SCHW - Free Report) is scheduled to report first-quarter 2024 results on Apr 15, before market open. Its revenues and earnings in the quarter are expected to have declined on a year-over-year basis.
In the fourth quarter of 2023, Schwab’s earnings beat the Zacks Consensus Estimate. Results benefited from the solid performance of the asset management business. Also, the absence of fee waivers and solid brokerage account numbers acted as tailwinds. 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 each 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 SCHW’s first-quarter earnings has been unchanged at 74 cents per share. The estimate indicates a decline of 20.4% from the year-ago quarter’s reported number.
The consensus estimate for sales is pegged at $4.72 billion, which indicates a fall of 7.8% from the year-ago quarter’s reported figure.
Management projects first-quarter 2024 revenues to grow 5-6% on a sequential basis.
Before we take a look at what our quantitative model predicts, let us check the factors that are likely to have impacted Schwab’s first-quarter performance.
Key Factors & Estimates for Q1
Client activity was decent in the first quarter. The expectation of a soft landing of the U.S. economy, the gradual cooling down of inflation and clarity on the Fed rate path drove client activity. However, volatility was lower in the equity markets and other asset classes, including commodities, bonds and foreign exchange.
In January and February, SCHW’s core net new assets declined 52% and 20% from the respective prior-year months. Thus, Schwab is not expected to have witnessed a rise in trading revenues in the to-be-reported quarter.
The Zacks Consensus Estimate for first-quarter trading revenues is pegged at $827 million, which suggests a decline of 7.3% from the prior-year quarter’s reported number. Our estimate for trading revenues is pinned at $822.8 million, indicating a decline of 7.8%.
Coming to net interest revenues, the consensus estimate for SCHW’s average interest-earning assets for the to-be-reported quarter is pegged at $437 billion, which suggests a decline of 13.5% from the prior-year quarter’s reported level.
The Federal Reserve kept interest rates steady during the quarter (at a 22-year high of 5.25-5.5%). Despite higher rates, SCHW is not expected to have recorded significant improvement in net interest revenues because of higher funding costs and relatively weak loan demand.
The Zacks Consensus Estimate for first-quarter net interest revenues is pegged at $2.23 billion, which indicates a year-over-year decline of 19.5%. Our estimate for the metric is $2.29 billion.
Nevertheless, the consensus estimate for SCHW’s asset management and administration fees of $1.31 billion implies a rise of 17.1% from the prior-year quarter’s reported number. We also project the metric to rise to $1.31 billion.
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 billion for the quarter.
What the Zacks Model Unveils
According to our quantitative model, the chances of Schwab beating the Zacks Consensus Estimate for earnings this time are high. This is because it has 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 +0.30%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Other Stocks Worth a Look
A few other finance stocks that you may want to consider, as these too have the right combination of elements to post an earnings beat in their upcoming releases per our model, are PNC Financial (PNC - Free Report) and Truist Financial Corporation (TFC - Free Report) .
The Earnings ESP for PNC Financial is +2.05% and it carries a Zacks Rank #3 at present. The company is slated to report first-quarter 2024 results on Apr 16. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
TFC is scheduled to release first-quarter 2024 earnings on Apr 22. The company has a Zacks Rank #3 and an Earnings ESP of +0.83% at present.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.