On Sep 3, 2013, we reaffirmed our Neutral recommendation on
The Charles Schwab Corporation
). Though the company reported lower-than-expected second-quarter
results, the initiatives to improve capital ratios and effective
capital deployment activities are impressive.
On Jul 16, Schwab reported second-quarter 2013 earnings per share
of 19 cents, missing the Zacks Consensus Estimate by a penny.
Higher operating expenses were primarily responsible for the
miss, but top-line improvement partially offset it.
The Zacks Consensus Estimate for 2013 decreased 1.4% to 73 cents
per share over the last 60 days. However, for 2014, the Zacks
Consensus Estimate increased 1.2% to 87 cents per share over the
same time period. As a result, Schwab currently carries a Zacks
Rank #3 (Hold).
Schwab is an asset for yield-seeking investors. The company
presently targets its cash dividend to be in the range of 20%-30%
of net income. Also, consistent focus on low cost capital
structure will likely improve its results in the upcoming
quarters. Moreover, synergies from acquisitions and stable
capital position will boost the company's financials going
On the flip side, Schwab is experiencing pressure on Daily
Average Trades (DATs) due to the disengagement of retail traders.
We expect the declining trend in DATs to continue in the near to
mid-term, on account of lower trading activity and flattish
Moreover, the company's business model is very sensitive to
interest rate. Until the economy recovers significantly and
interest rates improve decently, the company's net interest
margin and revenues will remain under pressure.
TD AMERITRADE (AMTD): Free Stock Analysis
BGC PARTNRS INC (BGCP): Free Stock Analysis
GAIN CAP HLDGS (GCAP): Free Stock Analysis
SCHWAB(CHAS) (SCHW): Free Stock Analysis
To read this article on Zacks.com click here.
Other Stocks Worth Considering
Some better performing banks include
GAIN Capital Holdings, Inc.
TD Ameritrade Holding Corp.
BGC Partners, Inc.
). While both GAIN Capital Holdings and Ameritrade Holding
Corporation carry a Zacks Rank #1 (Strong Buy), BGC Partners has
a Zacks Rank #2 (Buy).