Charles Schwab shares surge on profit beat, analysts react

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Charles Schwab shares surge on profit beat, analysts react
Credit: © Reuters.

Charles Schwab (NYSE: SCHW ) shares surged more than 6% intra-day today after the company reported its Q3 results , with EPS of $0.77 coming in better than the consensus estimate of $0.75. Meanwhile, revenue fell 16% year-over-year to $4.61 billion, missing the consensus estimate of $4.65B.

This decline was mainly driven by the temporary utilization of higher cost funding, lower interest-earning assets, and decreased trading activity. “Net interest revenue was down 24% year-over-year to $2.2 billion, reflecting the impact of client allocation decisions within a higher interest rate environment. However, cash realignment activity decelerated further during the quarter – even with the brief uptick in August and an increase in long-term interest rates,” mentioned CFO Peter Crawford.

Several Wall Street firms, including Deutsche Bank, Goldman Sachs, and Citi, reacted to the earnings report, reiterating their Buy ratings.

“We view SCHW's 3Q EPS as being overall better than expected with cash sorting easing in September vs. August to monthly levels near the best of this cycle. Core net new client assets also rebounded to $27bn in September vs. just $5bn in August, driving a core net new annualized organic growth rate of 4.0%,” commented the analysts at Deutsche Bank.

Furthermore, analysts at Goldman Sachs and Citi maintained their Buy rating and price targets of $78.00 and $75.00, respectively.

“Overall, 3Q23 results and Sept. trends were a touch better than expected which could have a positive stock impact given recent negative sentiment," mentioned the analysts at Citi.

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