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.
Schwab (SCHW) Slides on Disappointing Q2 Earnings & NIM View
Read MoreHide Full Article
Shares of Charles Schwab (SCHW - Free Report) tanked 4.6% yesterday following a disappointing management view for the second quarter. At its first Institutional Investor Day, chief financial officer Peter Crawford stated that adjusted earnings for the ongoing quarter are not expected to grow on a sequential basis, and net interest margin expansion is likely to be modest.
For the first quarter of 2024, Schwab posted adjusted earnings of 74 cents per share. This was well below the company’s guidance of 80-90 cents per share. Higher-than-expected funding costs and lower trading revenues mainly led to the weak first-quarter performance.
Schwab projects full-year 2024 adjusted earnings to grow at the upper end of the 20-30% range. In 2023, adjusted earnings per share was $3.13. The growth is likely to be driven by manageable adjusted expense growth of roughly 2% and a slowdown in client cash realignment activities.
SCHW also provided updates related to its integration of TD Ameritrade (TDA) clients into its platform. On May 13, the company finished its fifth and final round of client account transitions associated with TDA deal, marking the closure of “a historic integration.”
Further, the company remains on track to complete the remaining integration-related work by this year's end. These include decommissioning remaining systems and data centers, removing duplicative platforms as well as realizing the remaining almost 20% of the $1.8-$2 billion run-rate expense synergy target.
The company also noted that TDA client attrition is trending below its initial projections of 5-6%. The company is of the opinion that there’s more than $500 billion asset capture opportunity by introducing TDA clients to its broader capabilities.
Schwab reiterated its long-term 5-7% annual growth trajectory in net new assets (NNA), with 3-5% NNA growth expected from existing clients and 2-3% improvement in NNA by attracting new clients. The company also noted that it started 2024 on a positive note, with approximately $100 billion core NNA “gathered through Q1.”
Another area of growth for SCHW is lending. It has announced a mortgage product and pledged asset line. Hence, once interest rates fall and the demand for loans increases, the company expects to witness solid growth from here.
Therefore, diversified revenues and disciplined expense management, along with a gradual turnaround in the operating backdrop, are expected to support Schwab’s financials over time.
Over the past year, shares of Schwab have jumped 44.5%, outperforming the industry’s growth of 42.5%.
A couple of better-ranked brokerage firms are Interactive Brokers (IBKR - Free Report) and Robinhood Markets (HOOD - Free Report) .
Earnings estimates for IBKR have been revised marginally upward for the current year over the past month. The company’s shares have surged 52.9% over the past six months. IBKR currently carries a Zacks Rank #2 (Buy).
Robinhood also carries a Zacks Rank #2. Its earnings estimates have been revised 106.9% north for the current year over the past 30 days. In the last six months, HOOD’s shares have surged 137.1%.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Schwab (SCHW) Slides on Disappointing Q2 Earnings & NIM View
Shares of Charles Schwab (SCHW - Free Report) tanked 4.6% yesterday following a disappointing management view for the second quarter. At its first Institutional Investor Day, chief financial officer Peter Crawford stated that adjusted earnings for the ongoing quarter are not expected to grow on a sequential basis, and net interest margin expansion is likely to be modest.
For the first quarter of 2024, Schwab posted adjusted earnings of 74 cents per share. This was well below the company’s guidance of 80-90 cents per share. Higher-than-expected funding costs and lower trading revenues mainly led to the weak first-quarter performance.
Schwab projects full-year 2024 adjusted earnings to grow at the upper end of the 20-30% range. In 2023, adjusted earnings per share was $3.13. The growth is likely to be driven by manageable adjusted expense growth of roughly 2% and a slowdown in client cash realignment activities.
SCHW also provided updates related to its integration of TD Ameritrade (TDA) clients into its platform. On May 13, the company finished its fifth and final round of client account transitions associated with TDA deal, marking the closure of “a historic integration.”
Further, the company remains on track to complete the remaining integration-related work by this year's end. These include decommissioning remaining systems and data centers, removing duplicative platforms as well as realizing the remaining almost 20% of the $1.8-$2 billion run-rate expense synergy target.
The company also noted that TDA client attrition is trending below its initial projections of 5-6%. The company is of the opinion that there’s more than $500 billion asset capture opportunity by introducing TDA clients to its broader capabilities.
Schwab reiterated its long-term 5-7% annual growth trajectory in net new assets (NNA), with 3-5% NNA growth expected from existing clients and 2-3% improvement in NNA by attracting new clients. The company also noted that it started 2024 on a positive note, with approximately $100 billion core NNA “gathered through Q1.”
Another area of growth for SCHW is lending. It has announced a mortgage product and pledged asset line. Hence, once interest rates fall and the demand for loans increases, the company expects to witness solid growth from here.
Therefore, diversified revenues and disciplined expense management, along with a gradual turnaround in the operating backdrop, are expected to support Schwab’s financials over time.
Over the past year, shares of Schwab have jumped 44.5%, outperforming the industry’s growth of 42.5%.
Image Source: Zacks Investment Research
Currently, SCHW carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Brokerage Firms Worth a Look
A couple of better-ranked brokerage firms are Interactive Brokers (IBKR - Free Report) and Robinhood Markets (HOOD - Free Report) .
Earnings estimates for IBKR have been revised marginally upward for the current year over the past month. The company’s shares have surged 52.9% over the past six months. IBKR currently carries a Zacks Rank #2 (Buy).
Robinhood also carries a Zacks Rank #2. Its earnings estimates have been revised 106.9% north for the current year over the past 30 days. In the last six months, HOOD’s shares have surged 137.1%.