Market Overview

Bank Of America Downgrades Charles Schwab, Rate Headwinds Cloud Revenue Outlook

Share:
Bank Of America Downgrades Charles Schwab, Rate Headwinds Cloud Revenue Outlook

Over the past few years, net interest income (NII) has been Charles Schwab Corporation’s (NYSE: SCHW) revenue growth engine.

With Fed rate cuts now on the horizon, the company’s revenue outlook looks murkier, according to Bank of America Merrill Lynch.

The Analyst

BofA’s Michael Carrier downgraded the rating on Charles Schwab from Buy to Neutral while reducing the price target from $49 to $43.

The Thesis

While bulk transfers are now in the rear view, Charles Schwab is faced with lower core balances as well as possible rate cuts by the Fed, Carrier said in the note.

The analyst reduced the EPS estimates for 2019 and 2020 from $2.75 to $2.65 and from $2.95 to $2.50, respectively. He explained that the estimates now incorporate two rate cuts in the back half of 2019 as well as further pressure on balances in the near term, which could have a bigger impact on the company’s 2020 performance.

While the NII outlook is challenging, Charles Schwab has invested in several businesses over the past few years, which gives the company some flexibility to control expenses going ahead, Carrier mentioned. He added that the recent investments in infrastructure and technology could result in savings over time.

Price Action

Shares of Charles Schwab were trading down 1.16% at $39.99 midday Friday..

Related Links:

Benzinga's Top Upgrades, Downgrades For July 12, 2019

How To Bank Efficiently

Latest Ratings for SCHW

DateFirmActionFromTo
Aug 2019MaintainsHold
Jul 2019UpgradesMarket PerformOutperform
Jul 2019MaintainsBuy

View More Analyst Ratings for SCHW
View the Latest Analyst Ratings

Posted-In: Bank of America Merrill Lynch Michael CarrierAnalyst Color Downgrades Price Target Federal Reserve Analyst Ratings

 

Related Articles (SCHW)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
SAVEReinstates
FTSDowngrades
SPLKMaintains150.0
HEBDowngrades
CHHInitiates Coverage On97.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

OneLedger Is Latest Blockchain In Transport Alliance Member

Today's Pickup: Mobility Companies Tout Commitment To Equity; Refraction Launches Three-Wheeled Delivery Robot