Charles Schwab Misses Q4 Expectations, Shares Drop 3.5%

Shares of American multinational financial services company, Charles Schwab (NYSE: SCHW) were down 3.5% on January 18 to close at $92.16, after it reported weaker-than-expected Q4 results missing both earnings and revenue estimates.

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The underperformance can be attributed to uncertainty related to economic growth and inflation, and the impact of multiple global market disruptions, which offset higher levels of client activity and clients’ asset growth.

Q4 Performance

The company reported earnings of $0.86 per share, a 16% year-over-year growth; however, it fell two cents short of analysts’ estimates of $0.88 per share. The company reported earnings of $0.74 per share for the prior-year period.

Furthermore, revenues jumped 13% year-over-year to $4.71 billion. Yet, it lagged consensus estimates of $4.79 billion.

The increase in revenues reflects a 12% surge in Asset management and Administration fees, driven by higher balances in advisory solutions, proprietary and third-party mutual funds, and exchange traded funds (ETFs), coupled with a 19% growth in trading revenue due to higher activity levels.

Notably, at the end of the year, the company registered 22% year-over-year growth in client assets to $8.14 trillion, while brokerage accounts climbed 12% to 33.2 million.

CEO Comments

Charles Schwab CEO, Walt Bettinger, stated, “Following four recent acquisitions, including the largest brokerage transaction in history, I’m particularly proud of our progress in uniting as a single team, pulling in the same direction through challenge after challenge, supporting each other and our clients as we pursue Chuck Schwab’s vision.”

He further added, “I share his excitement and passion for our combined organization’s potential, and remain convinced we have the talent, culture, and client-first strategy needed to pursue the tremendous growth opportunities ahead of us.”

Wall Street’s Take

Following the Q4 results, one of the Top Analysts from Jefferies, Daniel Fannon reiterated a Buy rating on Charles Schwab with a price target of $104 (12.9% upside potential).

Overall, consensus among analysts is a Strong Buy based on 9 Buys and 3 Holds. The average Charles Schwab price target of $103.55 implies an upside potential of 12.4% from current levels. Meanwhile, SCHW shares have gained 55.6% over the last year.

TipRanks’ Smart Score

SCHW scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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