Schwab Earnings: Diversified Platform Exhibits Strength Despite Macro Weakness

Key Morningstar Metrics for Charles Schwab

• Fair Value Estimate: $97.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

What We Thought of Charles Schwab’s Earnings

Charles Schwab’s SCHW shares rallied 2%-3% in April 17 trading despite broader market weakness after the firm reported its first-quarter results. The firm brought in $138 billion in net new assets (up 44% year over year) despite significant market volatility.

Why it matters: We’re encouraged by Schwab’s strength in a tough period, with the firm’s expansive platform offerings and stability attracting inflows. This validates our thesis that financial services providers are likely to consolidate over time, which would benefit large firms like Schwab.

• With $9.9 trillion in client assets at quarter-end, Schwab likely boasts a low-teens share of retail investable assets. We continue to view Schwab, Fidelity, and Vanguard as the likely winners in ongoing industry consolidation.
• Strong quarterly results and reiterated full-year guidance for 13%-15% revenue growth and adjusted earnings per share of $4.10-$4.20, despite headwinds from lower equity valuations and projected declines in short-term interest rates, attest to the stability of Schwab’s diversified services platform.

The bottom line: We maintain our fair value estimate of $97 per share for wide-moat Schwab and continue to view the stock as attractive.

• We forecast 14% revenue growth and 30% adjusted EPS growth for 2025, in line with management’s outlook. First-quarter results were slightly stronger than we expected, with revenue of $2.71 billion and adjusted EPS of $1.04 edging our $2.63 billion and $1.02 respective estimates.
• While market projections for lower interest rates by year-end would pose a headwind (offsetting modest quarterly outperformance), we continue to view net interest margin expansion as feasible in a lower-rate environment, driven by ongoing paydown of high-cost supplemental borrowing.