HomeMost PopularInvestingSchwab (SCHW) Slides on Disappointing Q2 Earnings & NIM View

Schwab (SCHW) Slides on Disappointing Q2 Earnings & NIM View

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Shares of Charles Schwab SCHW 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 β€œa 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 β€œgathered 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%.
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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 and Robinhood Markets HOOD.

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%.

Research Chief Names β€œSingle Best Pick to Double”

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

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The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report

Interactive Brokers Group, Inc. (IBKR) : Free Stock Analysis Report

Robinhood Markets, Inc. (HOOD) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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