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Interactive Brokers (IBKR) Q4 Earnings Lag, Revenues Fall
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Interactive Brokers Group, Inc. (IBKR - Free Report) reported fourth-quarter 2016 adjusted earnings of 7 cents per share, which significantly lagged the Zacks Consensus Estimate of 32 cents. Also, earnings were 72% below the prior-year quarter figure of 25 cents.
Significant decrease in revenues, higher expenses as well as disappointing performance of the Market Making and Corporate segments led to the lower-than-expected quarterly results. However, on the upside, the company recorded improvement in interest income and a rise in DARTs.
Comprehensive net loss available to common shareholders amounted to $3 million or 5 cents per share, as against net income of $12 million or 18 cents per share in the prior-year quarter.
For 2016, adjusted earnings per share of $1.25 missed the Zacks Consensus Estimate of $1.56. However, it was 60% above the 2015 level. Further, comprehensive net income available to common shareholders was $80 million or $1.19 per share, up from $39 million or 62 cents per share in 2015.
Revenues Slump, Higher Costs Hurt Results
Total net revenue for the quarter tanked 29% year over year to $193 million. The top line declined primarily because of a drop in trading gains and higher other losses, partially offset by higher commissions and execution fees, and interest income. Also, the figure missed the Zacks Consensus Estimate of $296.5 million.
For 2016, total net revenue was up 17% year over year to $1.40 billion. However, the figure lagged the Zacks Consensus Estimate of $1.46 billion.
Total non-interest expenses increased 15% from the year-ago quarter to $165 million due to a rise in all components, except absence of customer bad debt in the reported quarter and stable general and administrative costs.
Income before income taxes came in at $28 million in the quarter, down 78% year over year. Similarly, pre-tax profit margin was 15%, compared with 47% in fourth-quarter 2015.
Capital Position Strengthens
As of Dec 31, 2016, cash and cash equivalents (including cash and securities set aside for regulatory purposes) totaled $25.9 billion, compared with $22.9 billion as of Dec 31, 2015. As of Dec 31, 2016, total assets amounted to $54.7 billion, compared with $48.7 billion as of Dec 31, 2015, while total equity was $5.8 billion compared with $5.3 billion on Dec 31, 2015.
Quarterly Segment Performance: Market Making Continues to Disappoint
Electronic Brokerage: Net revenue grew 34% year over year to $294 million Pre-tax income also rose 49% to $168 million. Total DARTs for cleared and execution-only customers were relatively stable at 640,000. Pre-tax profit margin improved to 57% from 52% in the prior-year quarter.
Market Making: Net revenue plunged 35% year over year to $45 million. Pre-tax income also plummeted 56% to $12 million. Therefore, pre-tax margin declined to 27% from the year-ago level of 39%.
Moreover, the Corporate segment reported pre-tax loss of $152 million compared with $13 million in the prior-year quarter. Net revenue was negative $146 million, compared with negative $17 million in the year-ago quarter.
Our Take
Interactive Brokers is poised to capitalize on growth scopes backed by its market-leading position, technological advancement and optimization of resource allocation across global electronic networks. Also, a strong liquidity and capital position will continue to support its expansion initiatives.
However, stiff competition and increasing volatility may continue to hamper the company’s near-term profitability.
Interactive Brokers Group, Inc. Price, Consensus and EPS Surprise
Among other investment brokers, we now look forward to E*TRADE Financial Corporation , Raymond James Financial, Inc. (RJF - Free Report) and Evercore Partners Inc. (EVR - Free Report) which are expected to report their results on Jan 25, Jan 26 and Feb 1, respectively.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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Interactive Brokers (IBKR) Q4 Earnings Lag, Revenues Fall
Interactive Brokers Group, Inc. (IBKR - Free Report) reported fourth-quarter 2016 adjusted earnings of 7 cents per share, which significantly lagged the Zacks Consensus Estimate of 32 cents. Also, earnings were 72% below the prior-year quarter figure of 25 cents.
Significant decrease in revenues, higher expenses as well as disappointing performance of the Market Making and Corporate segments led to the lower-than-expected quarterly results. However, on the upside, the company recorded improvement in interest income and a rise in DARTs.
Comprehensive net loss available to common shareholders amounted to $3 million or 5 cents per share, as against net income of $12 million or 18 cents per share in the prior-year quarter.
For 2016, adjusted earnings per share of $1.25 missed the Zacks Consensus Estimate of $1.56. However, it was 60% above the 2015 level. Further, comprehensive net income available to common shareholders was $80 million or $1.19 per share, up from $39 million or 62 cents per share in 2015.
Revenues Slump, Higher Costs Hurt Results
Total net revenue for the quarter tanked 29% year over year to $193 million. The top line declined primarily because of a drop in trading gains and higher other losses, partially offset by higher commissions and execution fees, and interest income. Also, the figure missed the Zacks Consensus Estimate of $296.5 million.
For 2016, total net revenue was up 17% year over year to $1.40 billion. However, the figure lagged the Zacks Consensus Estimate of $1.46 billion.
Total non-interest expenses increased 15% from the year-ago quarter to $165 million due to a rise in all components, except absence of customer bad debt in the reported quarter and stable general and administrative costs.
Income before income taxes came in at $28 million in the quarter, down 78% year over year. Similarly, pre-tax profit margin was 15%, compared with 47% in fourth-quarter 2015.
Capital Position Strengthens
As of Dec 31, 2016, cash and cash equivalents (including cash and securities set aside for regulatory purposes) totaled $25.9 billion, compared with $22.9 billion as of Dec 31, 2015. As of Dec 31, 2016, total assets amounted to $54.7 billion, compared with $48.7 billion as of Dec 31, 2015, while total equity was $5.8 billion compared with $5.3 billion on Dec 31, 2015.
Quarterly Segment Performance: Market Making Continues to Disappoint
Electronic Brokerage: Net revenue grew 34% year over year to $294 million Pre-tax income also rose 49% to $168 million. Total DARTs for cleared and execution-only customers were relatively stable at 640,000. Pre-tax profit margin improved to 57% from 52% in the prior-year quarter.
Market Making: Net revenue plunged 35% year over year to $45 million. Pre-tax income also plummeted 56% to $12 million. Therefore, pre-tax margin declined to 27% from the year-ago level of 39%.
Moreover, the Corporate segment reported pre-tax loss of $152 million compared with $13 million in the prior-year quarter. Net revenue was negative $146 million, compared with negative $17 million in the year-ago quarter.
Our Take
Interactive Brokers is poised to capitalize on growth scopes backed by its market-leading position, technological advancement and optimization of resource allocation across global electronic networks. Also, a strong liquidity and capital position will continue to support its expansion initiatives.
However, stiff competition and increasing volatility may continue to hamper the company’s near-term profitability.
Interactive Brokers Group, Inc. Price, Consensus and EPS Surprise
Interactive Brokers Group, Inc. Price, Consensus and EPS Surprise | Interactive Brokers Group, Inc. Quote
Currently, Interactive Brokers sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Among other investment brokers, we now look forward to E*TRADE Financial Corporation , Raymond James Financial, Inc. (RJF - Free Report) and Evercore Partners Inc. (EVR - Free Report) which are expected to report their results on Jan 25, Jan 26 and Feb 1, respectively.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>