Robust Trading Activity and Rates to Aid Schwab's Q2 Earnings

Charles Schwab SCHW is scheduled to announce second-quarter 2025 results on July 18, before market open. The company’s earnings and revenues are expected to have increased on a year-over-year basis.

Schwab’s first-quarter 2025 earnings outpaced the Zacks Consensus Estimate. Results benefited from the solid performance of the asset management business and higher net interest revenues (NIR). However, an increase in expenses acted as a headwind.
 
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 4.72%.
 

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 second-quarter performance.

Major Factors Likely to Influence Schwab’s Q2 Performance

Trading Revenues: Client activity was solid during the second quarter, with the major indexes experiencing extreme volatility due to the Trump administration’s tariff plans and their impact on the U.S. economy and the Fed’s monetary policy. In April and May, SCHW’s core net new assets witnessed strong year-over-year growth. Further, the number of new brokerage accounts opened grew in the first two months of the quarter.

Further, volatility was high in 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 $928.7 million, which suggests a 19.5% increase from the prior-year quarter. Our estimate for trading revenues is pegged at $859.6 million.

NIR: The consensus estimate for SCHW’s average interest-earning assets for the to-be-reported quarter is $421.3 billion, suggesting a marginal rise year over year. We expect the metric to be $421.7 billion.

Also, the Federal Reserve kept interest rates unchanged at 4.25-4.5% during the quarter. This is likely to have supported SCHW’s NIR, given relatively higher yields on interest-earning assets, partially offset by elevated funding costs. The Zacks Consensus Estimate for NIR is pegged at $2.73 billion, indicating a surge of 26.5%. Our estimate for the metric is $2.7 billion.

Asset Management and Administration Fees: Led by robust equity market performance, SCHW is likely to have recorded a rise in asset management and administration fees. For April and May, Schwab’s client assets receiving ongoing advisory services grew 12% and 13%, respectively, from the prior-year months. The consensus estimate for asset management and administration fees of $1.56 billion implies growth of 12.9%. We project the metric to rise to $1.53 billion.

Expenses: Schwab’s operating expenses have been elevated in the past few quarters. Due to persistent regulatory spending and strategic acquisitions, marketing and advertising, and efforts to enhance business efficiency, expenses are likely to have increased in the to-be-reported quarter.

We project total expenses of $3.12 billion for the quarter, up 6.2% from the prior-year quarter.

What the Zacks Model Reveals 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 +1.85%.

Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Q2 Earnings & Sales Estimates for SCHW

In the past seven days, the Zacks Consensus Estimate for earnings has been revised 1.9% upward to $1.08 per share. The estimate indicates a jump of 48% from the year-ago quarter.

The consensus estimate for sales is pegged at $5.67 billion, which suggests a 20.8% rise.

Other Finance Stocks Worth a Look

Here are a couple of finance stocks that you may want to consider, as these also have the right combination of elements to post an earnings beat in their upcoming releases, per our model:

The Earnings ESP for U.S. Bancorp USB is +0.17% and it carries a Zacks Rank of 3 at present. The company is slated to report second-quarter 2025 results on July 17. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Over the past seven days, the Zacks Consensus Estimate for U.S. Bancorp’s quarterly earnings has remained unchanged at $1.07.

Truist Financial TFC is scheduled to announce second-quarter 2025 results on July 18. The company carries a Zacks Rank #3 at present and has an Earnings ESP of +0.60%.

Quarterly earnings estimates for Truist have been revised 1.1% lower to 92 cents over the past week.

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This article originally published on Zacks Investment Research (zacks.com).

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