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A month has gone by since the last earnings report for Virtu Financial (VIRT). Shares have added about 6.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Virtu Financial 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 drivers.
Virtu Financial's Q3 Earnings Beat, Increase Y/Y
Virtu Financial’s third-quarter 2020 earnings per share of 81 cents beat the Zacks Consensus Estimate by 8%. Moreover, the bottom line skyrocketed 285.7% year over year.
Revenues of $362 million increased 44.8% year over year, driven by gain on the sale of MATCHNow as well as heightened levels of volatility, bid-ask spreads and trading volumes across global markets and asset classes due to the COVID-19 pandemic. However, the top line missed the consensus mark by 0.3%.
Quarterly Operational Update
Adjusted trading income of the company surged 45% to $362.3 million year over year. In the quarter under review, adjusted EBITDA jumped 139.5% to $248.7 million.
Total operating expenses jumped 3.9% year over year to $403 million. This increase was owing to higher brokerage, exchange, clearance fees and payments for order flow.
Adjusted net trading income from the Marketing Making segment rose 81.5% year over year to $257 million in the quarter under review. In this segment, adjusted net trading income from Global Equities rose 106.4% year over year to $211 million while the same from Global FICC, Options and Other climbed 16% year over year to $45.6 million. Adjusted net trading income from Execution Services decreased 2.8% year over year to $105 million.
The company's board of directors declared a quarterly cash dividend of 24 cents per share to be paid out on Dec 15, 2020 to shareholders of record as of Dec 1.
As of Sep 30, 2020, the company had total assets worth $9.4 billion, down 1.7% from the level at 2019 end. It exited the quarter with total equity of $1.8 billion, up 47% from the level on Dec 31, 2019. The company exited the third quarter with $567.7 million of cash and cash equivalents, down 22.5% from the 2019-end level.
In the quarter under review, long-term borrowings dropped 14.6% to $1.6 billion from the level at 2019 end.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 22.22% due to these changes.
Currently, Virtu Financial has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Virtu Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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