To The Moon

$Charles Schwab(SCHW)$ will be reporting its fourth-quarter and full-year 2024 results on 21 Jan before the market opens.

SCHW’s quarterly earnings and revenues are expected to have grown on a year-over-year basis. SCHW last reported earnings on 15 October 2024 before the market opened (BMO). SCHW shares gained +6.1% the day following the earnings announcement to close at 71.71.

Following its earnings release, 96 days ago, SCHW stock has drifted +6.6% higher. From the time it announced earnings, SCHW traded in a range between 69.69 and 83.35. The last price (76.41) is closer to the lower end of range.

The earnings per share is expected to come in at $0.91 per share in its upcoming release, pointing to a year-over-year increase of 32.4%. Revenues is anticipated to be $5.18 billion, exhibiting an increase of 16.2% compared to the year-ago quarter.

SCHW Trading and Net Interest Revenues To Watch

For the trading revenue, SCHW are seeing solid client activity during the fourth quarter. The client activity was driven by likelihood of robust U.S. economic growth, cooling inflation, the presidential poll results and clarity on the interest rate path.

In October and November, SCHW’s core net new assets surged substantially from the prior-year months. Also, the number of new brokerage accounts opened grew 17% and 25% in October and November, respectively, on a year-over-year basis.

Volatility was high in equity markets and other asset classes, including commodities, bonds and foreign exchange. This would help Schwab to expect a decent rise in trading revenues in the to-be-reported quarter. Market consensus estimate for trading revenues is pegged at $833.1 million, which suggests an 8.6% increase from the prior-year quarter.

Consensus estimate for SCHW’s average interest-earning assets for the to-be-reported quarter is pegged at $426.4 billion, suggesting a decline of 3.4% year over year. This is in line with the company’s efforts to shrink its balance sheet. Management expects average interest-earning assets to fall 3-6% year over year.

With the Fed lowered interest rates by 50 basis points (bps) during the fourth quarter, this has helped SCHW’s net interest revenues as funding costs come down. Net interest revenues is pegged at $2.43 billion, indicating year-over-year growth of 13.9%. SCHW expects NIM to expand to around 220 bps in the fourth quarter of 2024, driven by lower liability funding costs.

Asset management and administration fees for SCHW would likely record a decent improvement which is led by solid equity market performance. For October and November, Schwab’s client assets receiving ongoing advisory services grew 27% and 24%, respectively, from the prior-year months.

Consensus estimate for asset management and administration fees of $1.51 billion implies a jump of 21.9%. We project the metric to rise to $1.47 billion.

SCHW Operating Expenses Would Increase But For Good Reasons (Regulatory)

If there is something we need to watch is Schwab’s operating expenses, it has been increasing in the past few quarters. For the to-be-reported quarter, we are going to see higher expenses due to persistent regulatory spending and strategic buyouts.

SCHW anticipates post-TDA integration charges to be almost $23 million, and SCHW has project their total expenses of $2.97 billion for the quarter.

But I would expect 2025 to be better for SCHW if we see the deregulatory for financial institutional coming from the new Trump administration.

Charles Schwab (SCHW) Price Target

Based on 16 Wall Street analysts offering 12 month price targets for Charles Schwab in the last 3 months. The average price target is $86.88 with a high forecast of $98.00 and a low forecast of $70.00. The average price target represents a 13.70% change from the last price of $76.41.

If the financial sector deregulatory were to take place, we could be seeing banks like SCHW which have been spending quite a sum in the last few quarters, these expenses could be reduced, hence, we might even see more to be done to increase their trading revenues.

Charles Schwab (SCHW) Hedge Funds Increased Holdings

One things that I am watching is how hedge funds are feeling towards SCHW, they have increased their holdings by 8.5 million shares in the last quarter, so we will have to watch how these hedge funds would be moving their holdings around SCHW.

Charles Schwab (SCHW) Insider Transactions Over The Last Year

The biggest insider sale over the last year was from the Founder & Co-Chairman, Charles Schwab, for US$10 million worth of shares, at about US$76.40 per share.

If an insider was to sell their shares lower than the current traded share price, we might need to be concerned, but the chairman sold them around the current price at around $76, but this is not a sign of any good news.

What I would look out is how much insiders purchase, in the last twelve months insiders purchased 35.00k shares for US$2.3m but they sold 817.42k shares for US$60m.

So we need to watch closely as now SCHW insiders had sold more than they bought over the last year.

Charles Schwab (SCHW) Technical Analysis

We are seeing SCHW trading above the long-term MA (200D), which could mean that SCHW is making a reversal which is on the upside, as MACD has shown a nice upside movement.

What we need to watch is for MTF to give a more confirmed and clear upward trend.

Summary

For SCHW, I would think they could give a better EPS because of trading revenues, but this might not came as a surprise as the regulatory expenses would eat into its revenues.

Hence, I think we can take this opportunities to look at getting into SCHW because it should be benefitting from deregulatory as seen in the new Trump administration.

Appreciate if you could share your thoughts in the comment section whether you think SCHW would provide a surprise in its earnings and revenue.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.