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Despite Upbeat Q2 Results, Charles Schwab Fails to Impress Investors
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Despite Upbeat Q2 Results, Charles Schwab Fails to Impress Investors

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Charles Schwab’s second-quarter results have disappointed investors. The company’s shares fell 1.5% on Monday, as its upbeat results were overshadowed by the impacts of volatile financial markets.

Shares of The Charles Schwab Corporation (NYSE: SCHW) declined 1.5% on Monday even though the company delivered upbeat results for the second quarter of 2022. Volatility in the financial markets and its impact on Charles Schwab’s net brokerage accounts and client assets seem to have disappointed investors.

It is worth mentioning here that shares of this $117.9-billion financial services company grew a mere 0.6% in the extended trading hours.

Key Highlights of Charles Schwab’s Q2 Results

In the quarter, Charles Schwab’s adjusted earnings were $0.97 per share, 6.6% higher than the consensus estimate of $0.91 per share. The bottom line increased 39% year-over-year, driven by the top-line strength and expense management strategies.

Revenues totaled $5.09 billion in the quarter, up 1.2% from the consensus estimate of $5.03 billion. On a year-over-year basis, the top line advanced 13%, mainly due to a 31% rise in net interest revenue and a 4% increase in bank deposit account fees. A decline of 7% in trading revenue was a spoiler in the quarter.

Total active brokerage accounts stood at 33.9 million in the quarter, reflecting a 5% increase from the year-ago quarter. New brokerage accounts were down 39% year-over-year to 1 million in the quarter. Meanwhile, client assets were $6.83 trillion, down 9.8% from the year-ago tally of $7.57 trillion.

The CEO of Charles Schwab, Walt Bettinger, said, “Clients remained engaged during the second quarter even as pressures mounted on the U.S. economy, including rising inflation and the Fed’s corresponding shift to an aggressive tightening stance, ongoing geopolitical turmoil driven by the war in Ukraine, and more-volatile equity markets that are now in bear-market territory.”

Return on tangible common equity increased to 45% in the second quarter of 2022 from 20% in the year-ago quarter.

CFO’s Take on Charles Schwab

The CFO of Charles Schwab, Peter Crawford, said, “We believe the combination of our diversified revenue mix with disciplined expense prioritization helps keep us positioned to deliver healthy financial performance through the cycle.”

Wall Street Is Optimistic about Charles Schwab

According to TipRanks, the Street is unanimously optimistic about the prospects of SCHW and has a Strong Buy consensus rating based on nine Buys and three Holds on the stock. SCHW’s average price forecast of $84.85 suggests 38.55% upside potential from the current level. Over the past year, shares of SCHW have declined 8.2%.

Following the release, Daniel Fannon of Jefferies reiterated a Buy rating on SCHW with a price target of $78 (27.37% upside potential).

Bloggers Too Are Bullish on Charles Schwab

Per TipRanks, financial bloggers are 100% Bullish on SCHW, compared with the sector average of 66%.

Key Takeaways for SCHW’s Investors   

The fundamentals of Charles Schwab are solid, as evident from its second-quarter numbers. Meanwhile, the positive stance of analysts and bloggers enhances the investment appeal of the stock. However, the possible impacts of market volatility on its operations are concerning.

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