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Charles Schwab Corporation (NYSE:SCHW) is expected to release its Q3 2011 earnings on Monday, October 17. Competitors E-Trade (NASDAQ:ETFC) and Ameritrade (NYSE:AMTD) will closely follow with their earnings announcements on Oct 19 and Oct 25, respectively. Even though the economic environment remains uncertain, we expect the company to sustain its growth in revenue and net income.

Our price estimate for Charles Schwab is $16.11, which is about 30% higher than the market price.

Strong Market Activity

Despite the low interest rates and increased market volatility, the company’s monthly activity reports have demonstrated continued strong market activity. [1] With increased total client assets and daily average trades, revenue growth should be strong. Depending on the counter-effect of special charges relating to the Schwab Yield Plus Fund and the company’s affinity credit card program, if incurred in this quarter, as well as restructuring costs related to the optionsXpress merger, we also expect an increase in net income for the quarter.

(Chart created by using Trefis' app)

Acquisition of optionsXpress

The recently completed acquisition of optionsXpress (NASDAQ:OXPS) will expand Schwab’s presence in the options and futures segment. [2] We expect this $1 billion deal to positively impact the company’s revenues, though restructuring costs might overshadow that growth for this quarter. OptionsXpress provides brokerage services to futures, options, stocks, fixed income and mutual fund investors.

Notes:

  1. Schwab Reports Monthly Activity Highlights, Schwab’s Press Releases
  2. Schwab’s optionsXpress deal done, adding options growth, Reuters

Disclosure: None

Source: Charles Schwab Q3 Earnings Preview: Trends We're Watching

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