Tuesday April 4, 9:15 am Eastern Time
Individual Investor
Schwab Pre-Announces 90% Earnings Growth
Research Analyst: David Peltier (4/4/00)
Charles Schwab (NYSE: SCH - news) announced Monday morning that it will report record first quarter earnings per share of between $0.31 and $0.33, well above the $0.25 consensus estimate. We had sensed that an upside surprise was coming, but this figure was even a few pennies ahead of our expectations.
In Monday trading, the stock finished up $0.38 to $57.38 after trading as high as $60.88 amid the NASDAQ's worst point drop of all-time. Schwab is also now up over 45% since our original Magic 25 recommendation in December.
Schwab reported 320,000 daily average revenue trades (DART) in March, double what it posted the prior year. In February, this figure had declined sequentially to 280,000 from January's record numbers.
For the first time, this number includes 18,000 daily trades from customers acquired in the $488 million Cybercorp deal. While this is slightly below our original expectations, it is encouraging to see that Schwab's new pricing initiatives enabled it to retain most of the firm's 2,500 active investors.
Total revenue for the quarter came in at $1.55 billion, a 63% increase over the prior year. This type of growth partly enabled Schwab to gloat in front of all of those skeptics who have shunned the entire online brokerage field due in large part to the huge industry-wide $100 million monthly advertising bill.
However, numbers from Chase H&Q this morning confirmed a fact that we have been stressing all quarter- volume was huge. Daily trading on the Nasdaq averaged 1.8 billion shares during the first quarter, up sequentially 38% from what were then records as well. Compared to the previous year, Nasdaq volume was up an astounding 83%.
Volume was also robust on the NYSE, which averaged 1.1 billion shares daily. This represents 22% and 35% increases over the fourth quarter and previous year, respectively.
Preliminary numbers show that online trades increased by 50% sequentially. This bodes well for Schwab, which lately has seen over 70% of its trades come from the Internet-a number that will likely increase with the addition of Cybercorp.
We remain bullish on Schwab, despite its recent run. The stock should see continued upside as its competitors in the brokerage field confirm just how strong this quarter was in the coming weeks. |
