Interactive Brokers Group, Inc.’s (NasdaqGS:IBKR - News) fourth quarter 2011 earnings per share came in at 30 cents, substantially ahead of the Zacks Consensus Estimate of 23 cents. This also compared favorably with a loss of 67 cents in the year-ago quarter. During third quarter, the company earned twice the Zacks Consensus Estimate.
Including the effect of changes in the U.S. dollar value of Interactive’s non-U.S. subsidiaries, the company reported earnings of 27 cents compared with a loss of 56 cents in the year-ago quarter. This reflects the new GAAP convention that requires the posting of currency translation results contained in Other Comprehensive Income as part of reportable earnings.
Results benefited mainly from a substantial improvement in revenues, partially offset by higher interest and non-interest expenses. Net income attributable to non-controlling interests was also substantially higher during the reported quarter. The company’s Electronic Brokerage and Market Making segments continued to perform well with an impressive pre-tax income.
For the full year 2011, earnings were $1.40 per share, well above the Zacks Consensus Estimate of $1.05. This also compared favorably with a loss of 22 cents in the year-ago quarter.
Quarter in Detail
Net revenue increased 65% year over year to $307.9 million. The growth was primarily driven by a boost in trading gains (up 261% year over year to $150.5 million), higher commissions and execution fees (up 13% over the year-ago quarter to $109.9 million) and a rise in interest income (up 30% year over year to $68.4 million). Net revenues also surpassed the Zacks Consensus Estimate of $275.0 million.
For the full year, net revenue increased 47% year over year to $1.4 billion. The Zacks Consensus Estimate for the full year was $1.2 billion.
Net income (before income taxes and minority interest) was up 272% on a year-over-year basis at $156.0 million. Pre-tax profit margin was 51% compared with 22% in the prior-year quarter.
Total non-interest expenses increased 5% from the year-ago quarter to $151.9 million. Execution and clearing expenses increased 2%, while General and administrative expense increased 44%.
Segment Performance
Market Making: Net revenue increased 278% year over year to $166.1 million. Pre-tax income came in at $92.3 million compared with a loss of $23.8 million a year ago. Pre-tax profit margin increased to 56% from negative 54% in the prior-year quarter.
Electronic Brokerage: Net revenue increased 14% year over year to $166.4 million. Pre-tax income came in at $86.6 million, up 16% from $74.7 million a year ago. Pre-tax profit margin increased to 52% from 51% in the prior-year quarter. Total daily average revenue trades (DARTs) increased 20% year over year to 447,000.
Capital Position
Consolidated equity capital as of December 31, 2011 was $4.72 billion compared with $4.22 billion as of December 31, 2010.
Our Viewpoint
Though Interactive’s fundamentals remain strong with a liquid balance sheet, sturdy capital base and high barriers to entry, we remain concerned about the Market Making segment s ability to consistently generate sufficient returns to fund dividend payment. However, continued strong performance of its brokerage business and quarterly dividend restoring were impressive.
Interactive Brokers currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. However, the company’s peer Knight Capital Group Inc. (NYSE:KCG - News) retains a Zacks #3 Rank (short-term Hold rating).
More From Zacks.com
There are no comments yet