Interactive Brokers Group, Inc. (IBKR - Free Report) reported second-quarter 2017 adjusted earnings of 32 cents per share, which lagged the Zacks Consensus Estimate by a penny. Also, earnings were 20% below the prior-year quarter figure of 40 cents.
Higher expenses and lower trading volume hurt the results. On the other hand, an increase in revenues, improved Electronic Brokerage segment performance and a rise in DARTs acted as tailwinds.
Comprehensive net income available to common shareholders amounted to $29 million or 41 cents per share, up from $24 million or 36 cents per share in the prior-year quarter.
Higher Expenses More than Offset by Revenue Growth
Total net revenue grew 5% year over year to $387 million. The rise was primarily driven by higher commission fees and interest income, partially offset by decline in trading gains. The figure surpassed the Zacks Consensus Estimate of $356.5 million.
Total non-interest expenses increased 17% from the year-ago quarter to $183 million. The rise was mainly due to significant jump in general and administrative costs.
Income before income taxes came in at $204 million in the quarter, down 4% year over year. Similarly, pre-tax profit margin was 53% compared with 58% in the prior-year quarter.
Improvement in Quarterly Segment Performance
Electronic Brokerage: Net revenue increased 8% year over year to $334 million. Pre-tax income rose 4% to $198 million. Total DARTs for cleared and execution-only customers were 669,000, up 3% from the year-ago quarter. Pre-tax profit margin declined to 59% from 62% in the prior-year quarter.
Market Making: Net revenue plunged 47% year over year to $23 million. Pre-tax loss was $24 million as against pre-tax income of $5 million a year ago. The segment reported pre-tax loss due to lower trading volumes (as the company is exiting its options market making division) and fall in volatility and in the actual-to-implied volatility ratio.
In addition, the segments’ results included nearly $22 million in one-time exit costs, mainly consisting of the write-down of exchange trading rights.
Moreover, the Corporate segment reported net revenue of $30 million, surging 88% from the year-ago quarter. Pre-tax income was $30 million, up 76% from the prior-year quarter.
Capital Position Strengthens
As of Jun 30, 2017, cash and cash equivalents (including cash and securities set aside for regulatory purposes) totaled $26.3 billion compared with $25.9 billion as of Dec 31, 2016. As of Jun 30, 2017, total assets amounted to $57.6 billion compared with $54.7 billion as of Dec 31, 2016. Total equity was $6.2 billion compared with $5.8 billion at the end of December.
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, a rise in expenses and increasing volatility may continue to hamper the company’s near-term profitability.
Currently, Interactive Brokers carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Investment Brokers
The Charles Schwab Corp.’s (SCHW - Free Report) second-quarter 2017 earnings were in line the Zacks Consensus Estimate. Revenue growth, lower level of fee waivers and no provisions were among the positives. However, higher expenses and a decline in trading revenues remained the headwinds.
Among other investment brokers, we now look forward to E*TRADE Financial Corporation and Raymond James Financial, Inc. (RJF - Free Report) , which are slated to report their results on Jul 20 and Jul 26, respectively.
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Interactive Brokers Group, Inc. (IBKR - Free Report) reported second-quarter 2017 adjusted earnings of 32 cents per share, which lagged the Zacks Consensus Estimate by a penny. Also, earnings were 20% below the prior-year quarter figure of 40 cents.
Higher expenses and lower trading volume hurt the results. On the other hand, an increase in revenues, improved Electronic Brokerage segment performance and a rise in DARTs acted as tailwinds.
Comprehensive net income available to common shareholders amounted to $29 million or 41 cents per share, up from $24 million or 36 cents per share in the prior-year quarter.
Higher Expenses More than Offset by Revenue Growth
Total net revenue grew 5% year over year to $387 million. The rise was primarily driven by higher commission fees and interest income, partially offset by decline in trading gains. The figure surpassed the Zacks Consensus Estimate of $356.5 million.
Total non-interest expenses increased 17% from the year-ago quarter to $183 million. The rise was mainly due to significant jump in general and administrative costs.
Income before income taxes came in at $204 million in the quarter, down 4% year over year. Similarly, pre-tax profit margin was 53% compared with 58% in the prior-year quarter.
Improvement in Quarterly Segment Performance
Electronic Brokerage: Net revenue increased 8% year over year to $334 million. Pre-tax income rose 4% to $198 million. Total DARTs for cleared and execution-only customers were 669,000, up 3% from the year-ago quarter. Pre-tax profit margin declined to 59% from 62% in the prior-year quarter.
Market Making: Net revenue plunged 47% year over year to $23 million. Pre-tax loss was $24 million as against pre-tax income of $5 million a year ago. The segment reported pre-tax loss due to lower trading volumes (as the company is exiting its options market making division) and fall in volatility and in the actual-to-implied volatility ratio.
In addition, the segments’ results included nearly $22 million in one-time exit costs, mainly consisting of the write-down of exchange trading rights.
Moreover, the Corporate segment reported net revenue of $30 million, surging 88% from the year-ago quarter. Pre-tax income was $30 million, up 76% from the prior-year quarter.
Capital Position Strengthens
As of Jun 30, 2017, cash and cash equivalents (including cash and securities set aside for regulatory purposes) totaled $26.3 billion compared with $25.9 billion as of Dec 31, 2016. As of Jun 30, 2017, total assets amounted to $57.6 billion compared with $54.7 billion as of Dec 31, 2016. Total equity was $6.2 billion compared with $5.8 billion at the end of December.
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, a rise in expenses and increasing volatility may continue to hamper the company’s near-term profitability.
Currently, Interactive Brokers carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Investment Brokers
The Charles Schwab Corp.’s (SCHW - Free Report) second-quarter 2017 earnings were in line the Zacks Consensus Estimate. Revenue growth, lower level of fee waivers and no provisions were among the positives. However, higher expenses and a decline in trading revenues remained the headwinds.
Among other investment brokers, we now look forward to E*TRADE Financial Corporation and Raymond James Financial, Inc. (RJF - Free Report) , which are slated to report their results on Jul 20 and Jul 26, respectively.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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