With its big deal largely done, the company’s attention is focused on returning cash to shareholders.
Charles Schwab (SCHW 1.71%) delivered solid earnings and said it was focused on returning capital to shareholders. Investors liked the tone of the report, sending shares up about 4% as of 11:30 a.m. ET.
Strong markets driving asset growth
Schwab has long been one of the most prominent retail brokerages, a position it solidified via its 2020 acquisition of TD Ameritrade. But the last few years have been spent mostly focused on integrating the deal, a task that appears to be wrapping up.
The company earned $0.74 per share in the quarter on revenue of $4.74 billion, just ahead of Wall Street’s estimate for $0.73 per share on sales of $4.72 billion. Revenue was down 7% year over year and net income dropped by 15%, but management sees growth up ahead.
“Against an improved macroeconomic backdrop, clients entrusted us with $96 billion in core net new assets, including $45 billion in March alone,” CEO Walt Bettinger said in a statement. “At the same time, solid investor engagement contributed to over 1 million new brokerage account openings during the quarter.”
Is Charles Schwab a buy after its quarterly results?
Last year was a turbulent one for brokerages, but a strong start to 2024 has seen an uptick in business. Schwab is also paying down its higher-cost debt, which it hopes will help boost net interest margin to 3% by the end of next year.
Looking ahead, the company appears more interested in returning capital to shareholders than it does further acquisitions. Schwab’s management said it intends to resume opportunistic stock buybacks as “temporary headwinds continue to subside.”
Brokerages tend to ebb and flow along with interest in the stock market and its impact on trading volumes, but Schwab has established itself as a long-term winner. For those looking for exposure to retail trading, Schwab is a solid investment choice.
Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Charles Schwab. The Motley Fool recommends the following options: short June 2024 $65 puts on Charles Schwab. The Motley Fool has a disclosure policy.
