A month has gone by since the last earnings report for Interactive Brokers (IBKR Quick QuoteIBKR - Free Report) . Shares have lost about 7.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Interactive Brokers 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 drivers.

Interactive Brokers Lags on Q2 Earnings as Costs Rise

Interactive Brokers’ second-quarter 2019 earnings per share of 43 cents lagged the Zacks Consensus Estimate of 48 cents. Moreover, the figure compared unfavorably with the prior-year quarter’s earnings of 57 cents.

Results were hurt by a decline in revenues along with higher expenses. However, the Electronic Brokerage segment’s performance remained decent in the quarter. Moreover, the company witnessed year-over-year rise in daily average revenue trades.

Interactive Brokers reported comprehensive income available to common shareholders of $36 million or 46 cents per share compared with $28 million or 39 cents per share recorded in the prior-year quarter.

Revenues Decline, Expenses Rise

Total net revenues were $413 million, down 7.2% year over year. The decline was due to a fall in commissions and trading gains along with rise in interest expenses. The company reported other losses of $30 million in the quarter. The top line lagged the Zacks Consensus Estimate of $509 million.

Total non-interest expenses grew 8% from the year-ago quarter to $188 million. Rise in all expense components except for execution, clearing and distribution fees, and communications costs were the reasons behind this increase.

Income before income taxes was $225 million, down from $271 million in the prior-year quarter. Pre-tax profit margin was 54%, down from 61% a year ago.

Quarterly Segmental Performance

Electronic Brokerage: Net revenues grew 6.8% year over year to $473 million. Pre-tax income rose 6.7% to $302 million. Total DARTs for cleared and execution-only customers were 828,000, up 4% from the year-ago quarter. Pre-tax profit margin remained unchanged at 64%.

Market Making: Net revenues were $20 million, down 9.1% from the prior-year quarter. Pre-tax income was $11 million, up 22.2% year over year. Pre-tax profit margin was 55% compared with 41% in the year-ago quarter.

The Corporate segment reported negative revenues of $80 million compared with $20 million in the year-ago quarter. Pre-tax loss was $88 million compared with loss of $21 million a year ago.

Strong Capital Position

As of Jun 30, 2019, cash and cash equivalents (including cash and securities set aside for regulatory purposes) totaled $32.3 billion compared with $25.7 billion as of Dec 31, 2018. As of Jun 30, 2019, total assets were $66 billion compared with $60.5 billion as of Dec 31, 2018. Total equity was $7.6 billion compared with $7.2 billion at the end of December 2018.

How Have Estimates Been Moving Since Then?

Estimates review followed a downward path over the past two months.

VGM Scores

At this time, Interactive Brokers has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

Outlook

Interactive Brokers has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.