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What to Expect from Charles Schwab’s Earnings in 1Q16 and 2016

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Strong expected earnings

For 1Q16, Charles Schwab (SCHW) is expected to report EPS (earnings per share) of $0.29, compared to $0.25 4Q15 and $0.23 one year previously. For 2016, it is expected to report EPS of $1.24 as compared to $1.03 in 4Q15, reflecting a ~20% growth. To be sure, the company has been performing strongly on the back of client assets and bank’s revenue, and analysts expect the company to report revenues of $7.3 billion in 2015, reflecting a growth of 14% as compared to 2014.

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Charles Schwab also expects to beat Wall Street analysts’ diluted EPS estimate of $0.25 as it already reported fourth quarter diluted EPS of $0.28. The company reported a rise in its net profits to $416 million in 4Q15—up by 11% compared to 3Q15 and by 19% compared to 4Q14. In 2015, the company reported a revenue rise of 5% to $6.4 billion and a net income rise of 10% to $1.4 billion.

Wealth management and revenue

The company’s strategy to help its clients manage their wealth, rather than just to provide brokerage services, has proven to be beneficial over the past few quarters. Charles Schwab’s revenues stood at $1.7 billion in 4Q15, up by 9% compared to 4Q14. Its client assets rose by 2% to $2.5 trillion in 4Q15.

Here’s how some of Charles Schwab’s peers in the brokerage industry have fared with their respective quarterly earnings:

  • Interactive Brokers Group (IBKR) beat estimates by 16%.
  • TD Ameritrade Holding (AMTD) met expectations.
  • E*TRADE Financial (ETFC) met expectations.

Together, these companies make up 1.4% of the Vanguard Financials ETF (VFH).

Financial services

Charles Schwab offers services to its retail and institutional clients through two segments: Investor Services and Advisor Services.

The Investor Services division provides the following services:

  • retail brokerage
  • banking
  • retirement plans
  • corporate brokerage

The Advisor Services division provides the following services:

  • custodial, trading, and support
  • retirement businesses

In the next part, we’ll discuss Charles Schwab’s Investor Services.

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