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Why Is Interactive Brokers Group, Inc. (IBKR) Up 7.1% Since Last Earnings Report?

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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 added about 7.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Interactive Brokers Group, Inc. due for a pullback? 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 Q4 Earnings Beat as Revenues Rise

Interactive Brokers’ fourth-quarter 2020 adjusted earnings per share of 69 cents outpaced the Zacks Consensus Estimate of 59 cents. Also, the bottom line reflects growth of 19% on a year-over-year basis.

An increase in DARTs and higher revenues primarily supported the results. However, rise in expenses and lower interest rates acted as headwinds.

After considering non-recurring items, net income available to common shareholders (GAAP basis) was $71 million or 81 cents per share, up from $44 million or 57 cents per share in the prior-year quarter.

Interactive Brokers reported comprehensive income available to common shareholders of $92 million or $1.05 per share in the reported quarter compared with $51 million or 66 cents recorded in the prior-year quarter.

In 2020, adjusted earnings of $2.49 per share beat the consensus estimate of $2.37 and increased from $2.27 recorded in 2019. On GAAP basis, net income available to common shareholders was $195 million or $2.42 per share, up from $161 million or $2.10 per share in 2019.

Revenues Improve, Expenses Rise

Total net revenues were $599 million, up 19.8% year over year. The rise was driven by higher non-interest income, mainly attributable to improvement in commissions. The top line beat the Zacks Consensus Estimate of $534.5 million. Adjusted revenues were $582 million, up 15.7%.

In 2020, total net revenues grew 14.5% to $2.22 billion. The figure surpassed the Zacks Consensus Estimate of $2.16 billion. Adjusted revenues of $2.20 billion were up 11.1%.

Total non-interest expenses increased 10.1% to $207 million. The rise was due to an increase in almost all cost components except for general and administrative expenses.

Income before income taxes was $392 million, increasing 25.6% from the prior-year quarter.

Adjusted pre-tax profit margin was 64%, up from 63%.

During the quarter, total customer DARTs increased significantly year over year to 2.11 million. Further, total cleared DARTs jumped from 0.72 million to 1.87 million.

Additionally, customer accounts grew 55.5% from the year-ago quarter to 1,073,000.

Capital Position Strong

As of Dec 31, 2020, cash and cash equivalents (including cash and securities set aside for regulatory purposes) totaled $48 billion compared with $30.1 billion on Dec 31, 2019.

As of Dec 31, 2020, total assets were $95.7 billion compared with $71.7 billion on Dec 31, 2019. Total equity was $9 billion, up from $7.9 billion.

Outlook

The company anticipates the next 25 basis point unanticipated increase in rates to result in additional $98 million in net interest income over the next four quarters and $103 million as the run rate for 2021.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 34.54% due to these changes.

VGM Scores

At this time, Interactive Brokers Group, Inc. has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Interactive Brokers Group, Inc. has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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