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Interactive Brokers (IBKR) Stock Up 3.2% on Q3 Earnings Beat
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Shares of Interactive Brokers Group, Inc. (IBKR - Free Report) jumped 3.2% in after-hours trading following the release of third-quarter 2017 results. Adjusted earnings of 43 cents per share surpassed the Zacks Consensus Estimate of 37 cents. Also, earnings were 43% above the prior-year quarter figure of 30 cents.
Results benefited from improvement in revenues, lower operating expenses and a rise in DARTs while lower trading volume was the undermining factor. Further, Electronic Brokerage segment continued to perform decently and divestiture of the company’s U.S. options market making business acted as a tailwind.
Comprehensive net income available to common shareholders amounted to $32 million or 44 cents per share, up from $20 million or 30 cents per share in the prior-year quarter.
Rise in Revenues, Lower Costs Support Results
Total net revenues jumped 23% year over year to $426 million. The rise was primarily driven by significant increase in commission fees and interest income, partially offset by a decline in trading gains (down 71%). The figure beat the Zacks Consensus Estimate of $375 million.
Total non-interest expenses fell 2% from the year-ago quarter to $158 million. The decrease was mainly due to lower general and administrative costs, and absence of consumer bad debt.
Income before income taxes came in at $268 million in the quarter, surging 46% year over year. Similarly, pre-tax profit margin was 63% compared with 53% in the prior-year quarter.
Segment Performance Improve
Electronic Brokerage: Net revenues increased 27% year over year to $367 million. Pre-tax income rose 13% to $142 million. Total DARTs for cleared and execution-only customers were 695,000, up 14% from the year-ago quarter. Pre-tax profit margin improved to 61% from 56% in the prior-year quarter.
Market Making: Net revenues plunged 30% year over year to $30 million. Pre-tax income was $11 million, up 57% from the year-ago quarter. The improvement was mainly driven by decline in operating costs, as the company completed the winding down of its U.S. options market making business. The segment’s results included a $10 million net recovery of exit costs. Pre-tax profit margin improved to 37% from 16% in the prior-year quarter.
Moreover, the Corporate segment reported net revenues of $29 million, significantly up from $14 million in the year-ago quarter. Pre-tax income was $32 million, up drastically from $14 million in the prior-year quarter.
Capital Position Strengthens
As of Sep 30, 2017, cash and cash equivalents (including cash and securities set aside for regulatory purposes) totaled $25.6 billion compared with $25.9 billion as of Dec 31, 2016. As of Sep 30, 2017, total assets amounted to $59.8 billion compared with $54.7 billion as of Dec 31, 2016. Total equity was $6.3 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. With completion of the sale of its U.S. options-market-making business, the company plans to focus on strengthening its Electronic Brokerage segment. These restructuring efforts will likely support its financials going forward.
Interactive Brokers Group, Inc. Price, Consensus and EPS Surprise
Performance of Other Investment Broker & Upcoming Releases
The Charles Schwab Corp.’s (SCHW - Free Report) third-quarter 2017 earnings were a penny above the Zacks Consensus Estimate. Revenue growth, lower level of fee waivers and no provisions were among the positives. However, higher expenses and a fall in trading revenues remained the headwinds.
We now look forward to E*TRADE Financial Corporation and Raymond James Financial, Inc. (RJF - Free Report) , which are slated to report results on Oct 19 and Oct 25, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Interactive Brokers (IBKR) Stock Up 3.2% on Q3 Earnings Beat
Shares of Interactive Brokers Group, Inc. (IBKR - Free Report) jumped 3.2% in after-hours trading following the release of third-quarter 2017 results. Adjusted earnings of 43 cents per share surpassed the Zacks Consensus Estimate of 37 cents. Also, earnings were 43% above the prior-year quarter figure of 30 cents.
Results benefited from improvement in revenues, lower operating expenses and a rise in DARTs while lower trading volume was the undermining factor. Further, Electronic Brokerage segment continued to perform decently and divestiture of the company’s U.S. options market making business acted as a tailwind.
Comprehensive net income available to common shareholders amounted to $32 million or 44 cents per share, up from $20 million or 30 cents per share in the prior-year quarter.
Rise in Revenues, Lower Costs Support Results
Total net revenues jumped 23% year over year to $426 million. The rise was primarily driven by significant increase in commission fees and interest income, partially offset by a decline in trading gains (down 71%). The figure beat the Zacks Consensus Estimate of $375 million.
Total non-interest expenses fell 2% from the year-ago quarter to $158 million. The decrease was mainly due to lower general and administrative costs, and absence of consumer bad debt.
Income before income taxes came in at $268 million in the quarter, surging 46% year over year. Similarly, pre-tax profit margin was 63% compared with 53% in the prior-year quarter.
Segment Performance Improve
Electronic Brokerage: Net revenues increased 27% year over year to $367 million. Pre-tax income rose 13% to $142 million. Total DARTs for cleared and execution-only customers were 695,000, up 14% from the year-ago quarter. Pre-tax profit margin improved to 61% from 56% in the prior-year quarter.
Market Making: Net revenues plunged 30% year over year to $30 million. Pre-tax income was $11 million, up 57% from the year-ago quarter. The improvement was mainly driven by decline in operating costs, as the company completed the winding down of its U.S. options market making business. The segment’s results included a $10 million net recovery of exit costs. Pre-tax profit margin improved to 37% from 16% in the prior-year quarter.
Moreover, the Corporate segment reported net revenues of $29 million, significantly up from $14 million in the year-ago quarter. Pre-tax income was $32 million, up drastically from $14 million in the prior-year quarter.
Capital Position Strengthens
As of Sep 30, 2017, cash and cash equivalents (including cash and securities set aside for regulatory purposes) totaled $25.6 billion compared with $25.9 billion as of Dec 31, 2016. As of Sep 30, 2017, total assets amounted to $59.8 billion compared with $54.7 billion as of Dec 31, 2016. Total equity was $6.3 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. With completion of the sale of its U.S. options-market-making business, the company plans to focus on strengthening its Electronic Brokerage segment. These restructuring efforts will likely support its financials going forward.
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 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 Broker & Upcoming Releases
The Charles Schwab Corp.’s (SCHW - Free Report) third-quarter 2017 earnings were a penny above the Zacks Consensus Estimate. Revenue growth, lower level of fee waivers and no provisions were among the positives. However, higher expenses and a fall in trading revenues remained the headwinds.
We now look forward to E*TRADE Financial Corporation and Raymond James Financial, Inc. (RJF - Free Report) , which are slated to report results on Oct 19 and Oct 25, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>