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Interactive Brokers (IBKR) Down 8.2% Since Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Interactive Brokers Group, Inc. (IBKR - Free Report) . Shares have lost about 8.2% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is IBKR due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Interactive Brokers Beats on Q2 Earnings, Costs Down
Interactive Brokers’ second-quarter 2018 earnings per share of 58 cents surpassed the Zacks Consensus Estimate of 51 cents. Moreover, the figure was higher than prior-year quarter’s earnings of 32 cents per share.
Results benefited from an improvement in revenues and rise in DARTs along with lower expenses. Further, the Electronic Brokerage segment continued to perform decently.
The company reported comprehensive income available to common shareholders of $28 million or 39 cents per share, down from $29 million or 41 cents per share reported in the prior-year quarter.
Revenues Improve & Expenses Decline
Total net revenues for the reported quarter increased 15% year over year to $445 million. The rise was primarily driven by an increase in commission fees and interest income, partially offset by lower trading gains, fall in other income as well as higher interest expenses. The figure surpassed the Zacks Consensus Estimate of $437 million.
Total non-interest expenses decreased 4.9% from the year-ago quarter to $174 million. The decline was primarily due to lower general and administrative costs.
Income before income taxes was $271 million in the reported quarter, up from $204 million in the prior-year quarter. Similarly, the pre-tax profit margin was 61% compared with 53% in the prior-year quarter.
Quarterly Segmental Performance
Electronic Brokerage: Net revenues increased 32.6% year over year to $443 million. Pre-tax income rose 42.9% to $283 million. Total DARTs for cleared and execution-only customers were 797,000, up 19% from the year-ago quarter. Pre-tax profit margin improved to 64% from 59% in the prior-year quarter.
Market Making: Net revenues were $22 million, down from $23 million recorded in the prior-year quarter. Pre-tax income was $9 million against loss of $24 million in the year-ago quarter. Pre-tax profit margin was 41% against pre-tax loss margin of 104% in the prior-year quarter.
The Corporate segment reported negative revenues of $20 million compared with revenues of $30 million in the year-ago quarter. Pre-tax loss was $21 million against pre-tax income of $30 million in the year-ago quarter.
Capital Position
As of Jun 30, 2018, cash and cash equivalents (including cash and securities set aside for regulatory purposes) totaled $23.6 billion compared with $22 billion as of Dec 31, 2017. As of Jun 30, 2018, total assets amounted to $60.3 billion compared with $61.2 billion as of Dec 31, 2017. Total equity was $6.7 billion compared with $6.4 billion at the end of December 2017.
Outlook
As the increase in the Fed funds target rates will benefit net interest income (NII), Interactive Brokers expects to produce an additional $14 million in NII over the next four quarters, with another 25 basis points rise in overnight interest rates.
Further, as a result of the discontinuation of its options market making activities, the company expects nearly $40 million in net expenses annually to be absorbed by the Electronic Brokerage segment.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months.
Interactive Brokers Group, Inc. Price and Consensus
At this time, IBKR has a subpar Growth Score of D. Its Momentum is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
IBKR has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Interactive Brokers (IBKR) Down 8.2% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Interactive Brokers Group, Inc. (IBKR - Free Report) . Shares have lost about 8.2% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is IBKR due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Interactive Brokers Beats on Q2 Earnings, Costs Down
Interactive Brokers’ second-quarter 2018 earnings per share of 58 cents surpassed the Zacks Consensus Estimate of 51 cents. Moreover, the figure was higher than prior-year quarter’s earnings of 32 cents per share.
Results benefited from an improvement in revenues and rise in DARTs along with lower expenses. Further, the Electronic Brokerage segment continued to perform decently.
The company reported comprehensive income available to common shareholders of $28 million or 39 cents per share, down from $29 million or 41 cents per share reported in the prior-year quarter.
Revenues Improve & Expenses Decline
Total net revenues for the reported quarter increased 15% year over year to $445 million. The rise was primarily driven by an increase in commission fees and interest income, partially offset by lower trading gains, fall in other income as well as higher interest expenses. The figure surpassed the Zacks Consensus Estimate of $437 million.
Total non-interest expenses decreased 4.9% from the year-ago quarter to $174 million. The decline was primarily due to lower general and administrative costs.
Income before income taxes was $271 million in the reported quarter, up from $204 million in the prior-year quarter. Similarly, the pre-tax profit margin was 61% compared with 53% in the prior-year quarter.
Quarterly Segmental Performance
Electronic Brokerage: Net revenues increased 32.6% year over year to $443 million. Pre-tax income rose 42.9% to $283 million. Total DARTs for cleared and execution-only customers were 797,000, up 19% from the year-ago quarter. Pre-tax profit margin improved to 64% from 59% in the prior-year quarter.
Market Making: Net revenues were $22 million, down from $23 million recorded in the prior-year quarter. Pre-tax income was $9 million against loss of $24 million in the year-ago quarter. Pre-tax profit margin was 41% against pre-tax loss margin of 104% in the prior-year quarter.
The Corporate segment reported negative revenues of $20 million compared with revenues of $30 million in the year-ago quarter. Pre-tax loss was $21 million against pre-tax income of $30 million in the year-ago quarter.
Capital Position
As of Jun 30, 2018, cash and cash equivalents (including cash and securities set aside for regulatory purposes) totaled $23.6 billion compared with $22 billion as of Dec 31, 2017. As of Jun 30, 2018, total assets amounted to $60.3 billion compared with $61.2 billion as of Dec 31, 2017. Total equity was $6.7 billion compared with $6.4 billion at the end of December 2017.
Outlook
As the increase in the Fed funds target rates will benefit net interest income (NII), Interactive Brokers expects to produce an additional $14 million in NII over the next four quarters, with another 25 basis points rise in overnight interest rates.
Further, as a result of the discontinuation of its options market making activities, the company expects nearly $40 million in net expenses annually to be absorbed by the Electronic Brokerage segment.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months.
Interactive Brokers Group, Inc. Price and Consensus
Interactive Brokers Group, Inc. Price and Consensus | Interactive Brokers Group, Inc. Quote
VGM Scores
At this time, IBKR has a subpar Growth Score of D. Its Momentum is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
IBKR has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.