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Is a Positive Earnings Surprise Likely for Schwab (SCHW) in Q1?
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Charles Schwab (SCHW - Free Report) is scheduled to report first-quarter 2022 results on Apr 18, before market open. Its revenues and earnings in the quarter are expected to have improved on a year-over-year basis.
In fourth-quarter 2021, Schwab’s earnings missed the Zacks Consensus Estimate. While results reflected solid client asset balance, a rise in new brokerage accounts and a slight dip in operating expenses, fee waivers and lower interest rates were headwinds.
The company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 1.7%.
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 30 days, the Zacks Consensus Estimate for SCHW’s first-quarter earnings has been revised 1.2% lower to 85 cents. The estimate indicates an increase of 1.2% from the year-ago quarter’s reported number.
The consensus estimate for first-quarter sales is pegged at $4.84 billion, which suggests an increase of 2.6% 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 first-quarter performance.
Key Factors & Estimates for Q1
After witnessing the gradual normalization in overall trading activities over the last two quarters, trading revenues are expected to have rebounded in the first quarter of 2022.
The quarter began with expectations of trading volumes declining to levels seen during the pre-pandemic era after an exceptional performance during 2020 and 2021. Yet, the ongoing Russia-Ukraine conflict and prospects of multiple and bigger rate hikes by the Federal Reserve to control the raging inflation led to an increase in trading volumes in the quarter.
The developments led to unexpected heightened levels of volatility in the equity markets.
Despite the rise in volatility, investors did not seem very interested in entering the markets. Schwab witnessed a sequential decline in new brokerage accounts.
In January, the company opened 426,000 new brokerage accounts, down 10% from the prior month’s levels. In February, new brokerage accounts decreased 16% sequentially to 356,000.
Thus, despite the unexpected increase in volatility, Schwab’s trading revenues are not likely to have improved much in the quarter under review compared with the previous reported quarter.
The Zacks Consensus Estimate for first-quarter trading revenues is pegged at $1.02 billion, which suggests a marginal decline from the previous quarter’s reported number.
The consensus estimate for total client assets for the first quarter is pegged at $7.8 trillion, which indicates a 4.4% decline sequentially. Nevertheless, the consensus estimate for average interest-earning assets of $621 billion suggests growth of 5.6% from the previous quarter’s levels.
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 $2.27 billion, which suggests a rise of 5.9% sequentially.
The consensus estimate for asset management and administration fees of $1.08 billion suggests a decline of 3.2% sequentially.
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 as well.
What the Zacks Model Unveils
According to our quantitative model, the chances of Schwab beating the Zacks Consensus Estimate 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 +0.43%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Other Stocks Worth a Look
A few other finance stocks, which 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 Commerce Bancshares, Inc. (CBSH - Free Report) and Associated BancCorp (ASB - Free Report) .
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Is a Positive Earnings Surprise Likely for Schwab (SCHW) in Q1?
Charles Schwab (SCHW - Free Report) is scheduled to report first-quarter 2022 results on Apr 18, before market open. Its revenues and earnings in the quarter are expected to have improved on a year-over-year basis.
In fourth-quarter 2021, Schwab’s earnings missed the Zacks Consensus Estimate. While results reflected solid client asset balance, a rise in new brokerage accounts and a slight dip in operating expenses, fee waivers and lower interest rates were headwinds.
The company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 1.7%.
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 30 days, the Zacks Consensus Estimate for SCHW’s first-quarter earnings has been revised 1.2% lower to 85 cents. The estimate indicates an increase of 1.2% from the year-ago quarter’s reported number.
The consensus estimate for first-quarter sales is pegged at $4.84 billion, which suggests an increase of 2.6% 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 first-quarter performance.
Key Factors & Estimates for Q1
After witnessing the gradual normalization in overall trading activities over the last two quarters, trading revenues are expected to have rebounded in the first quarter of 2022.
The quarter began with expectations of trading volumes declining to levels seen during the pre-pandemic era after an exceptional performance during 2020 and 2021. Yet, the ongoing Russia-Ukraine conflict and prospects of multiple and bigger rate hikes by the Federal Reserve to control the raging inflation led to an increase in trading volumes in the quarter.
The developments led to unexpected heightened levels of volatility in the equity markets.
Despite the rise in volatility, investors did not seem very interested in entering the markets. Schwab witnessed a sequential decline in new brokerage accounts.
In January, the company opened 426,000 new brokerage accounts, down 10% from the prior month’s levels. In February, new brokerage accounts decreased 16% sequentially to 356,000.
Thus, despite the unexpected increase in volatility, Schwab’s trading revenues are not likely to have improved much in the quarter under review compared with the previous reported quarter.
The Zacks Consensus Estimate for first-quarter trading revenues is pegged at $1.02 billion, which suggests a marginal decline from the previous quarter’s reported number.
The consensus estimate for total client assets for the first quarter is pegged at $7.8 trillion, which indicates a 4.4% decline sequentially. Nevertheless, the consensus estimate for average interest-earning assets of $621 billion suggests growth of 5.6% from the previous quarter’s levels.
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 $2.27 billion, which suggests a rise of 5.9% sequentially.
The consensus estimate for asset management and administration fees of $1.08 billion suggests a decline of 3.2% sequentially.
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 as well.
What the Zacks Model Unveils
According to our quantitative model, the chances of Schwab beating the Zacks Consensus Estimate 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 +0.43%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Other Stocks Worth a Look
A few other finance stocks, which 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 Commerce Bancshares, Inc. (CBSH - Free Report) and Associated BancCorp (ASB - Free Report) .
The Earnings ESP for Commerce Bancshares is +2.33% and it carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CBSH is scheduled to report quarterly numbers on Apr 19.
Associated BancCorp is slated to report quarterly earnings on Apr 21.
ASB, which sports a Zacks Rank of 1 at present, has an Earnings ESP of +0.81%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.