Market Overview

Charles Schwab Earnings Preview: Marginally Better Q4 Results Expected

Charles Schwab (NYSE: SCHW) is scheduled to report fourth-quarter 2011 results Wednesday morning, January 18. Investors could use some good news. Though revenue has risen for four straight quarters, the share price has faced resistance at $13 a since August. And Deutsche Bank last week downgraded the stock due to the challenging environment for online brokers.

The analysts' forecast calls for Charles Schwab to report that its per-share earnings came to $0.13 for the quarter, and that revenue totaled $1.1 billion. That compares to $0.10 per share on $1.1 billion in the same period of last year. But note that the EPS estimate is down from $0.16 some 60 days ago. Charles Schwab, though, has not fallen short of EPS estimates in the past five quarters.

The forecast for the full year is more promising. Earnings are predicted to come in at $0.71 per share, an increase of 46.5% from the previous year. And analysts are looking for revenues to have risen 10.4% to $4.7 billion.

The Company

San Francisco-based Charles Schwab provides securities brokerage, banking, and related financial services to individuals and institutional clients. It manages more than $1.5 trillion in client assets and operates primarily in the United States, the United Kingdom and Hong Kong. The company was founded in 1971 and now is an S&P 500 component with a market cap of $15.8 billion.

During the three months that ended in December, the online broker launched a new U.S. dividend equity ETF, completed of its acquisition of compliance software provider Compliance11, redesigned and updated its educational website and launched a new banking app for the iPad.

Performance

The company has a long-term earnings per share growth forecast of 15.1%. Its P/E and PEG ratios are greater than the industry average, but so is the operating margin. The dividend yield is 1.9%. Ten of 21 analysts who follow the stock rate it a Buy or Strong Buy; none recommend selling. They have a mean price target on shares that is almost 9% higher than the current share price.

The share price is up more than 6% in the past month but still down almost 36% from the 52-week high. It is currently above the 50-day moving average but so far below the falling 200-day moving average. Over the past six months, the stock has underperformed the broader markets but outperformed competitor E*Trade Financial (NASDAQ: ETFC).

See also: Five Key ETFs for Q4 Earnings Reports.

[NOTE: This post was revised to correct the date on which Schwab will report.]

ACTION ITEMS:

Bullish: Investors interested in exchange traded funds invested in Charles Schwab might want to consider the following trades:

  • iShares Dow Jones US Financial Services (NYSE: IYG) is more than 30% higher than the 52-week low.
  • Market Vectors Bank and Brokerage ETF (NYSE: RKH) is more than 30% higher than the recent IPO.
  • SPDR S&P Capital Markets ETF (NYSE: KCE) is almost 27% higher than the 52-week low.
  • iShares Dow Jones US Broker-Dealers (NYSE: IAI) is about 20% higher than the 52-week low.
Bearish:

Traders may prefer to consider these alternative positions in the same industry:

  • MarketAxess (NASDAQ: MKTX) is up more than 58% from the 52-week low.
  • LPL Investment (NASDAQ: LPLA) is almost 44% from the 52-week low.
  • TD Ameritrade (NASDAQ: AMTD) is up more than 24% from the 52-week low.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Posted-In: analyst forecasts Charles SchwabEarnings Long Ideas News Short Ideas Previews Trading Ideas

 

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