A month has gone by since the last earnings report for Interactive Brokers (IBKR). Shares have added about 0.2% 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 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.
Interactive Brokers Beats on Q1 Earnings, Costs Rise
Interactive Brokers’ first-quarter 2019 earnings per share of 64 cents surpassed the Zacks Consensus Estimate of 43 cents. Moreover, the figure compared favorably with the prior-year quarter’s earnings of 63 cents.
Results benefited from an improvement in revenues, partly offset by higher expenses. However, the Electronic Brokerage segment’s performance was not very impressive during the quarter. Moreover, the company witnessed a decline in daily average revenue trades (DARTs).
Interactive Brokers reported comprehensive income available to common shareholders of $48 million or 64 cents per share compared with $47 million or 65 cents per share recorded in the prior-year quarter.
Revenue Growth Offsets Rise in Expenses
Total net revenues were $558 million, up 5.9% year over year. The rise was primarily driven by an increase in interest income and other income, partly offset by higher interest expenses.
Total non-interest expenses grew 17.1% from the year-ago quarter to $219 million. Rise in all expense components except for execution, clearing and distribution fees, and communications costs were the reasons behind the increase.
Income before income taxes was $339 million, down marginally from $340 million in the prior-year quarter. Pre-tax profit margin was 61%, down from 65%.
Quarterly Segmental Performance
Electronic Brokerage: Net revenues decreased 1.9% year over year to $456 million. Pre-tax income declined 14.1% to $250 million. Total DARTs for cleared and execution-only customers were 848,000, down 10% from the year-ago quarter. Pre-tax profit margin declined to 55% from 63%.
Market Making: Net revenues were $15 million, down 28.6% from the prior-year quarter. Pre-tax income was $6 million, down 33.3% year over year. Pre-tax profit margin was 40% compared with 43% in the year-ago quarter.
The Corporate segment reported revenues of $87 million compared with $41 million in the year-ago quarter. Pre-tax income was $83 million, up from $40 million a year ago.
Strong Capital Position
As of Mar 31, 2019, cash and cash equivalents (including cash and securities set aside for regulatory purposes) totaled $29.1 billion compared with $25.7 billion as of Dec 31, 2018.
As of Mar 31, 2019, total assets were $63.5 billion compared with $60.5 billion as of Dec 31, 2018. Total equity was $7.4 billion compared with $7.2 billion at the end of December 2018.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months.
At this time, Interactive Brokers has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Interactive Brokers has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Interactive Brokers Group, Inc. (IBKR) : Free Stock Analysis Report
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