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.
Should You Tap Charles Schwab's Q1 Earnings With ETFs?
Read MoreHide Full Article
Charles Schwab Corporation (SCHW - Free Report) reported strong Q1 2023 earnings, surpassing earnings expectations and driving up its stock price. The company's stock jumped by more than 3.9% in the key trading session on Apr 17.
The financial services company has reported Q1 2023 adjusted earnings of 93 cents per share, exceeding the Zacks Consensus Estimate of 90 cents. The earnings also saw a jump of 21% from the previous year's quarter. The results excluded acquisition and integration-related costs as well as amortization of acquired intangibles.
The net income (GAAP basis) for the quarter was $1.6 billion or 83 cents per share, up from $1.4 billion or 67 cents per share in the same quarter last year. Our projection for earnings per share (GAAP basis) was 80 cents.
The company's Q1 results were boosted by higher rates, which resulted in an increase in net interest income (NII). This led to revenue growth, despite lower bank deposit fees and volatile market conditions negatively affecting trading income. The absence of fee waivers and solid brokerage account numbers also had a positive impact on the quarter's results. However, higher expenses were a hindering factor.
The company's Q1 net revenues amounted to $5.12 billion, showing a growth of 10% compared to the previous year. The increase was primarily due to a 27% rise in NII, although a significant decline of 49% in bank deposit fees offset some of the gains. However, the company's top line failed to meet the Zacks Consensus Estimate of $5.15 billion. Our own estimate for this metric was $5.3 billion.
Should You Tap Charles Schwab’s Q1 Earnings With ETFs?
Since the collapse of Silicon Valley Bank, the brokerage has been experiencing significant pressure as investors are concerned about the possibility of a similar outcome for the company. However, Schwab noted that its loan-to-deposit ratio is low in an attempt to soothe anxious investors’ nerves. Also, the suspension of its share repurchase program turned investors pessimistic.
In late-March, Morgan Stanley downgraded Charles Schwab due to the chances of extended earnings recovery timeline, as quoted on CNBC. The stock has a Zacks Rank #4 (Sell) at the time of writing.
Against this backdrop, investors can play ETFs that are heavy on the company. The basket approach lessens the company specific risks.
ETFs in Focus
One ETF that investors may consider to play Schwab’s decent Q1 earnings is the iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI - Free Report) . This ETF invests in companies that operate as broker-dealers or securities exchanges, including Charles Schwab. As one of the leading broker-dealers in the industry, Schwab’s positive earnings report is likely to have a positive impact on IAI. The SCHW takes about 20.64% of the fund. The fund was up 1.5% on Apr 17.
Another ETF to watch in light of Schwab’s Q1 earnings is Amplify Digital & Online Trading ETF . The underlying BlueStar Global E-Brokers and Digital Capital Markets Index tracks the performance of companies engaged in online securities brokerage and lending, market making and digital asset capital markets. Charles Schwab takes the top position with about 9.42% exposure.
Finally, the God Bless America ETF (YALL - Free Report) is another ETF to consider in light of Schwab’s strong Q1 earnings. The fund was up 0.5% on Apr 17. This ETF invests in companies that provide exposure to various sectors with financials stocks taking a decent share. Charles Schwab takes about 4.9% of the fund.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Should You Tap Charles Schwab's Q1 Earnings With ETFs?
Charles Schwab Corporation (SCHW - Free Report) reported strong Q1 2023 earnings, surpassing earnings expectations and driving up its stock price. The company's stock jumped by more than 3.9% in the key trading session on Apr 17.
The financial services company has reported Q1 2023 adjusted earnings of 93 cents per share, exceeding the Zacks Consensus Estimate of 90 cents. The earnings also saw a jump of 21% from the previous year's quarter. The results excluded acquisition and integration-related costs as well as amortization of acquired intangibles.
The net income (GAAP basis) for the quarter was $1.6 billion or 83 cents per share, up from $1.4 billion or 67 cents per share in the same quarter last year. Our projection for earnings per share (GAAP basis) was 80 cents.
The company's Q1 results were boosted by higher rates, which resulted in an increase in net interest income (NII). This led to revenue growth, despite lower bank deposit fees and volatile market conditions negatively affecting trading income. The absence of fee waivers and solid brokerage account numbers also had a positive impact on the quarter's results. However, higher expenses were a hindering factor.
The company's Q1 net revenues amounted to $5.12 billion, showing a growth of 10% compared to the previous year. The increase was primarily due to a 27% rise in NII, although a significant decline of 49% in bank deposit fees offset some of the gains. However, the company's top line failed to meet the Zacks Consensus Estimate of $5.15 billion. Our own estimate for this metric was $5.3 billion.
Should You Tap Charles Schwab’s Q1 Earnings With ETFs?
Since the collapse of Silicon Valley Bank, the brokerage has been experiencing significant pressure as investors are concerned about the possibility of a similar outcome for the company. However, Schwab noted that its loan-to-deposit ratio is low in an attempt to soothe anxious investors’ nerves. Also, the suspension of its share repurchase program turned investors pessimistic.
In late-March, Morgan Stanley downgraded Charles Schwab due to the chances of extended earnings recovery timeline, as quoted on CNBC. The stock has a Zacks Rank #4 (Sell) at the time of writing.
Against this backdrop, investors can play ETFs that are heavy on the company. The basket approach lessens the company specific risks.
ETFs in Focus
One ETF that investors may consider to play Schwab’s decent Q1 earnings is the iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI - Free Report) . This ETF invests in companies that operate as broker-dealers or securities exchanges, including Charles Schwab. As one of the leading broker-dealers in the industry, Schwab’s positive earnings report is likely to have a positive impact on IAI. The SCHW takes about 20.64% of the fund. The fund was up 1.5% on Apr 17.
Another ETF to watch in light of Schwab’s Q1 earnings is Amplify Digital & Online Trading ETF . The underlying BlueStar Global E-Brokers and Digital Capital Markets Index tracks the performance of companies engaged in online securities brokerage and lending, market making and digital asset capital markets. Charles Schwab takes the top position with about 9.42% exposure.
Finally, the God Bless America ETF (YALL - Free Report) is another ETF to consider in light of Schwab’s strong Q1 earnings. The fund was up 0.5% on Apr 17. This ETF invests in companies that provide exposure to various sectors with financials stocks taking a decent share. Charles Schwab takes about 4.9% of the fund.