Charles Schwab Profit Jumps 28%
Charles Schwab Corp. reported a 28% jump in third-quarter earnings and said it plans to add up to 1,700 employees next year to expand its mutual fund and international operations.
San Francisco-based Schwab, the largest U.S. discount and online broker, said its net income rose to $97.8 million, or 35 cents a diluted share, in the third quarter, up from $76.5 million, or 33 cents, a year ago.
Mutual fund service fees, net interest income and principal transaction revenue all rose more than 20%.
The results met Schwab’s estimate last month that it would earn 33 cents to 35 cents a share in the quarter.
Schwab’s performance bucked a decline in brokerage earnings in the latest quarter, largely from trading losses in emerging markets after Russia’s default in August. Schwab, by contrast, has very little debt or emerging market business and doesn’t make bets with its own capital. About half of Schwab’s revenue comes from commissions on its customers’ trades.
Schwab wants to expand its 13,000-person work force by 10% to 13% if earnings keep growing, said Steven Scheid, the company’s chief financial officer. That would translate to 1,300 to 1,690 new jobs. Scheid said the company wants to expand in foreign markets like Britain, Canada and Japan, although it isn’t planning any acquisitions.
Schwab returned 31% on shareholders’ equity, up from 30% a year ago. Many other securities firms have reported single-digit return on equity for the quarter, as they absorbed trading losses from their bond and emerging market businesses. Schwab’s profit margin rose to 13.9% from 12.5%.
Net revenue rose 15% to $705.2 million, while expenses rose 12% to $542.7 million.
At a Glance
Other earnings, excluding one-time gains and charges unless noted:
* CalMat Co. said its third-quarter net income jumped 72%, to $16 million, or 67 cents a share, from $9.3 million, or 39 cents, a year ago. Revenue increased 17%, to $158.4 million, with strong volume and pricing improvements, and operating margins increased from 17% to 22%. The Los Angeles-based company said strong demand for its products--particularly because of the recovery in Southern California’s construction market--combined with increasing benefits from its profit improvement program, will result in continued earnings strength for the rest of 1998 and 1999.
* Excite Inc. reported a surprising third-quarter pro forma profit, as revenue for the No. 2 Internet search engine nearly tripled on strong advertising sales. The Redwood City-based company said it had profit of $1.3 million, or 2 cents a diluted share, excluding acquisition-related expenses and amortization from an agreement with Netscape Communications Corp. That compares with a pro forma loss of $5.8 million, or 19 cents, a year ago. Analysts were expecting a loss of 2 cents. Revenue soared 175%, to $44 million. Excite said traffic on its network of Web sites increased to an average of 50 million page views a day in September, a 15% increase over page views in June.
* Lam Research Inc. said its first-quarter loss more than doubled as the semiconductor-equipment maker sold fewer machines and warned that it may have to cut jobs. The Fremont-based company lost $26.8 million, or 70 cents a share, in the quarter ended Sept. 30, compared with a loss of $12.2 million, or 32 cents, a year earlier. Analysts expected a loss of 70 cents. Revenue tumbled 51%, to $142.2 million from $289.9 million.
* Sun Microsystems Inc., a leading maker of computer servers and workstations, said earnings rose 21% in its first fiscal quarter, to $197.9 million, or 50 cents a share, a penny higher than estimates. Sales climbed 19%, to $2.49 billion, bolstered by strong sales of servers that run computer networks. The Mountain View-based company reported earnings after the market closed.
MORE EARNINGS: C3
