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MARKETS LIVE BLOG:

STOCK FUTURES CLIMB AS RESULTS SEASON KICKS INTO HIGH GEAR

Tech-focused investors prepare for fresh wave of earnings highlighted by struggling Tesla

Interactive Brokers (IBKR) Beats on Q1 Earnings, Costs Rise

Zacks Equity Research

Interactive Brokers Group, Inc.’s IBKR 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 for the reported quarter 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. Also, the figure surpassed the Zacks Consensus Estimate of $464 million.

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.

Our Take

While Interactive Brokers is poised to capitalize on growth prospects, backed by its market-leading position, technological advancement and optimization of resource allocation across global electronic networks, its high dependence on IBG LLC is a major concern. This is because, if IBG LLC fails to provide sufficient funds to pay taxes or for any other purpose, the company’s financial condition may suffer.

Interactive Brokers Group, Inc. Price, Consensus and EPS Surprise

Interactive Brokers Group, Inc. Price, Consensus and EPS Surprise | Interactive Brokers Group, Inc. Quote

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Currently, Interactive Brokers carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance and Upcoming Releases of Other Companies

Charles Schwab’s SCHW first-quarter 2019 earnings of 69 cents per share surpassed the Zacks Consensus Estimate of 66 cents. Revenue growth (driven by rise in interest income) and an increase in total client assets aided results.

We now look forward to TD Ameritrade Holding Corp. AMTD and Raymond James Financial, Inc. RJF, which are slated to announce results on Apr 23 and Apr 24, respectively.

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The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report
 
Raymond James Financial, Inc. (RJF) : Free Stock Analysis Report
 
TD Ameritrade Holding Corporation (AMTD) : Free Stock Analysis Report
 
Interactive Brokers Group, Inc. (IBKR) : Free Stock Analysis Report
 
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Zacks Investment Research