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Low Market Volatility to Hurt Schwab's (SCHW) Q2 Earnings
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Charles Schwab (SCHW - Free Report) is scheduled to report second-quarter 2024 results on Jul 16, before market open. While the company’s earnings are expected to have declined in the quarter on a year-over-year basis, revenues are anticipated to have improved.
In the first quarter of 2024, Schwab’s earnings beat the Zacks Consensus Estimate. Results benefited from the solid performance of the asset management business. The absence of fee waivers and solid brokerage account numbers acted as tailwinds. However, lower revenues due to higher funding costs 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 average beat being 3.2%.
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 second-quarter earnings has been revised 2.6% lower to 74 cents per share. The estimate indicates a decline of 1.3% from the year-ago quarter’s reported number.
The consensus estimate for sales is pegged at $4.68 billion, which indicates a marginal rise from the year-ago quarter’s reported figure.
Management projects second-quarter 2024 total revenues to decrease 1-2% sequentially.
Before we take a look at what our quantitative model predicts, let us check the factors that are likely to have impacted Schwab’s second-quarter performance.
Key Factors & Estimates for Q2
Client activity was decent in the second quarter. The likelihood of a soft landing of the U.S. economy, gradually cooling inflation and clarity on the interest rate path majorly drove client activity. In April and May, SCHW’s core net new assets increased 143% and 50% from the respective prior-year months.
Also, the Zacks Consensus Estimate for second-quarter new brokerage accounts is pegged at 990,000, which indicates a 3.1% rise from the prior-year quarter’s actual.
However, volatility was low in equity markets and other asset classes, including commodities, bonds and foreign exchange. Thus, despite significantly higher client activity, Schwab is not expected to have witnessed a substantial rise in trading revenues in the to-be-reported quarter because of relatively low volatility.
The Zacks Consensus Estimate for second-quarter trading revenues is pegged at $800 million, which suggests a marginal decline from the prior-year quarter’s reported number. Our estimate for trading revenues is pinned at $810.9 million, indicating a year-over-year rise of only 1%.
Coming to net interest revenues, the consensus estimate for SCHW’s average interest-earning assets for the to-be-reported quarter is pegged at $424 billion, which suggests a decline of 12.6% 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.
The Zacks Consensus Estimate for second-quarter net interest revenues is pegged at $2.24 billion, which indicates a year-over-year decline of 2.4%. Our estimate for the metric is $2.30 billion.
Nevertheless, the consensus estimate for SCHW’s asset management and administration fees of $1.39 billion implies a rise of 18.6% from the prior-year quarter’s reported number. We project the metric to rise to $1.41 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 $2.93 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 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 are reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Schwab is -2.57%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Stocks Worth a Look
A few finance stocks that you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are BlackRock, Inc. (BLK - Free Report) and Ally Financial Inc. (ALLY - Free Report) .
The Earnings ESP for BLK is +0.62% and it carries a Zacks Rank of 3 at present. The company is slated to report second-quarter 2024 results on Jul 15.
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Low Market Volatility to Hurt Schwab's (SCHW) Q2 Earnings
Charles Schwab (SCHW - Free Report) is scheduled to report second-quarter 2024 results on Jul 16, before market open. While the company’s earnings are expected to have declined in the quarter on a year-over-year basis, revenues are anticipated to have improved.
In the first quarter of 2024, Schwab’s earnings beat the Zacks Consensus Estimate. Results benefited from the solid performance of the asset management business. The absence of fee waivers and solid brokerage account numbers acted as tailwinds. However, lower revenues due to higher funding costs 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 average beat being 3.2%.
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 second-quarter earnings has been revised 2.6% lower to 74 cents per share. The estimate indicates a decline of 1.3% from the year-ago quarter’s reported number.
The consensus estimate for sales is pegged at $4.68 billion, which indicates a marginal rise from the year-ago quarter’s reported figure.
Management projects second-quarter 2024 total revenues to decrease 1-2% sequentially.
Before we take a look at what our quantitative model predicts, let us check the factors that are likely to have impacted Schwab’s second-quarter performance.
Key Factors & Estimates for Q2
Client activity was decent in the second quarter. The likelihood of a soft landing of the U.S. economy, gradually cooling inflation and clarity on the interest rate path majorly drove client activity. In April and May, SCHW’s core net new assets increased 143% and 50% from the respective prior-year months.
Also, the Zacks Consensus Estimate for second-quarter new brokerage accounts is pegged at 990,000, which indicates a 3.1% rise from the prior-year quarter’s actual.
However, volatility was low in equity markets and other asset classes, including commodities, bonds and foreign exchange. Thus, despite significantly higher client activity, Schwab is not expected to have witnessed a substantial rise in trading revenues in the to-be-reported quarter because of relatively low volatility.
The Zacks Consensus Estimate for second-quarter trading revenues is pegged at $800 million, which suggests a marginal decline from the prior-year quarter’s reported number. Our estimate for trading revenues is pinned at $810.9 million, indicating a year-over-year rise of only 1%.
Coming to net interest revenues, the consensus estimate for SCHW’s average interest-earning assets for the to-be-reported quarter is pegged at $424 billion, which suggests a decline of 12.6% 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.
The Zacks Consensus Estimate for second-quarter net interest revenues is pegged at $2.24 billion, which indicates a year-over-year decline of 2.4%. Our estimate for the metric is $2.30 billion.
Nevertheless, the consensus estimate for SCHW’s asset management and administration fees of $1.39 billion implies a rise of 18.6% from the prior-year quarter’s reported number. We project the metric to rise to $1.41 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 $2.93 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 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 are reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Schwab is -2.57%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Stocks Worth a Look
A few finance stocks that you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are BlackRock, Inc. (BLK - Free Report) and Ally Financial Inc. (ALLY - Free Report) .
The Earnings ESP for BLK is +0.62% and it carries a Zacks Rank of 3 at present. The company is slated to report second-quarter 2024 results on Jul 15.
ALLY is scheduled to release second-quarter 2024 earnings on Jul 17. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +2.67%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.