Maintaining Buy on Charles Schwab: Anticipated Earnings Recovery Outweighs Near-term EPS Adjustment

In a report released today, Brian Bedell from Deutsche Numis maintained a Buy rating on Charles Schwab (SCHW – Research Report), with a price target of $81.00.

Brian Bedell has given his Buy rating due to a combination of factors that indicate a positive outlook for Charles Schwab’s stock despite some near-term adjustments. After a detailed review which included the latest metrics from May and discussions with the investor relations team, Bedell has slightly lowered the second quarter EPS estimate to $0.712 from $0.73, which is still below the consensus of $0.77. However, he perceives the May metrics positively due to better-than-expected organic growth in client assets and smaller-than-anticipated deposit outflows, which are likely to support net interest margin (NIM) expansion as high-cost borrowing is reduced.
Furthermore, while the EPS forecasts for 2024 and 2025 have been modestly decreased, Bedell projects a strong earnings rebound with about a 50% increase in EPS in 2025 and an additional one-third growth in 2026. These projections are above the consensus by 7% and 15% for 2025 and 2026, respectively. Despite reducing the price target to $81 from $83 due to these adjusted estimates, Bedell maintains a Buy rating based on the anticipated robust earnings recovery as the company continues to pay down high-cost borrowing and stabilizes its earning asset levels.

Based on the recent corporate insider activity of 108 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of SCHW in relation to earlier this year.

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Charles Schwab (SCHW) Company Description:

Founded in 1986, The Charles Schwab Corp. is a savings and loan holding company, which provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. It primarily operates through two segments, Investor Services and Advisor Services. The company is based in San Francisco, California.