Charles Schwab (SCHW Quick QuoteSCHW - Free Report) is scheduled to report third-quarter 2024 results on Oct. 15, before the market opens. While the company’s earnings are expected to have declined on a year-over-year basis, revenues are anticipated to have improved.

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In the second quarter, Schwab’s earnings met 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, higher funding costs and a rise in adjusted expenses were the undermining factors.

The company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and met in one, with the average beat being 2.17%.
 

The Charles Schwab Corporation Price and EPS Surprise

The Charles Schwab Corporation price-eps-surprise | The Charles Schwab Corporation Quote

Before we take a look at what our quantitative model predicts, let us check the factors that are likely to have impacted Schwab’s third-quarter performance.

Major Factors to Note & Q3 Estimates for SCHW

Client activity was solid during the third quarter. The likelihood of a soft landing of the U.S. economy, cooling inflation and clarity on the interest rate path majorly drove client activity. In July and August, SCHW’s core net new assets surged substantially from the prior-year months.

Also, the number of new brokerage accounts opened grew 8% and 4% in July and August, respectively, on a year-over-year basis.

Further, volatility was high in equity markets and other asset classes, including commodities, bonds and foreign exchange. Thus, Schwab is expected to have witnessed a decent rise in trading revenues in the to-be-reported quarter. The Zacks Consensus Estimate for trading revenues is pegged at $803 million, which suggests a 4.6% increase from the prior-year quarter. Our estimate for trading revenues is pinned at $810.2 million.

Coming to net interest revenues, the consensus estimate for SCHW’s average interest-earning assets for the to-be-reported quarter is pegged at $410.3 billion, suggesting a decline of 9.6% year over year. 

Though the Federal Reserve lowered interest rates by 50 basis points at the Sept. 17-18 FOMC meeting, SCHW is not expected to have benefited from it. The company’s net interest revenues are likely to have been hurt by higher funding costs. The Zacks Consensus Estimate for net interest revenues is pegged at $2.2 billion, indicating a year-over-year fall of 1.9%. Our estimate for the metric is $2.29 billion.

Driven by solid equity market performance, SCHW is likely to have recorded a decent improvement in asset management and administration fees. For July and August, Schwab’s client assets receiving ongoing advisory services grew 16% and 20%, respectively, from the prior-year months. The consensus estimate for asset management and administration fees of $1.43 billion implies a rise of 16.6%. We project the metric to rise to $1.38 billion.

Schwab’s operating expenses have been elevated in the past few quarters. Due to persistent regulatory spending and strategic buyouts, expenses are expected to have been high in the to-be-reported quarter. We project total expenses of $2.99 billion for the quarter.

What the Zacks Model Unveils for Schwab

According to our quantitative model, the chances of Schwab beating the Zacks Consensus Estimate for earnings this time are high. This is because it has 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’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Schwab is 0.75%.

Zacks Rank: The company currently carries a Zacks Rank #3.

In the past seven days, the Zacks Consensus Estimate for third-quarter earnings has remained unchanged at 75 cents per share. The estimate indicates a decline of 2.6% from the year-ago quarter.

The consensus estimate for sales is pegged at $4.77 billion, which indicates a 3.6% rise.

Management projects third-quarter 2024 revenues to grow 2-3% sequentially. This will be driven by “healthy investor engagement across Schwab’s modern wealth platform and the continued slowing of rate-related client cash realignment activity.”

Stocks Worth a Look

Here are a couple of 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:

JPMorgan (JPM Quick QuoteJPM - Free Report) is scheduled to release quarterly earnings on Oct. 11. The company has a Zacks Rank #3 and an Earnings ESP of +0.40% at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the past 30 days, the Zacks Consensus Estimate for JPM’s quarterly earnings has moved almost 1% lower to $4.02.

The Earnings ESP for PNC Financial (PNC Quick QuotePNC - Free Report) is +1.44% and it carries a Zacks Rank #3 at present. The company is slated to report quarterly results on Oct. 15.

PNC’s quarterly earnings estimates have been revised 1.9% north to $3.29 over the past month.