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Analyst Blog

On Feb 21, 2014, we issued an updated research report on Interactive Brokers Group, Inc. (IBKR - Analyst Report). The company, which is in the investment brokerage space, recently reported dismal fourth-quarter 2013 results with higher operating expenses that were partially offset by top-line growth. Though we remain encouraged on its strong capital base and solid liquidity position, we remain cautious amid macro headwinds across the industry.

Interactive Brokers reported earnings of 7 cents per share, lagging the Zacks Consensus Estimate of 15 cents. Also, this was below 19 cents earned in the year-ago quarter.

With this, the company missed the Zacks Consensus Estimate in 2 quarters while it posted in-line earnings in the remaining quarters of 2013.

Net revenue was up 1.1% year over year to $249.9 million in the reported quarter, primarily due to higher commission and execution fees, as well as interest income and other income. However, a significant increase in general and administrative expenses led to a 39.9% year-over-year rise in total non-interest expenses to $211.1 million.

Interactive Brokers’ Electronic Brokerage segment witnessed a 22.9% year-over-year improvement. However, with the deteriorating performance of the Market Making segment, we remain concerned about its consistency to generate sufficient returns to fund dividend payment.

Interactive Brokers looks promising owing to its technological excellence in global electronic trading platform, ability to tap opportunities in the emerging markets of Taiwan, Mexico and India and strong fundamentals. However, we believe stiff competition and any sudden unfavorable changes in the global market may weigh on the company’s financials in the long run.

Following the results, Zacks Consensus Estimate has not been in trend over the past 30 days. The Zacks Consensus Estimate for 2014 and 2015 remained stable at $1.07 and $1.21, respectively.

Interactive Brokers currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked stocks worth considering include Investment Technology Group Inc. (ITG - Snapshot Report), LPL Financial Holdings Inc. (LPLA - Snapshot Report) and Piper Jaffray Companies (PJC - Snapshot Report). All these carry a Zacks Rank #1 (Strong Buy).

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