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Virtu Financial (VIRT) Stock Down 19% Despite Q1 Earnings Beat

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Virtu Financial, Inc. VIRT shares have declined 18.5% since the company reported first-quarter 2022 earnings on Apr 28. Though the quarterly earnings and revenues outpaced their respective Zacks Consensus Estimate, investors’ sentiments might have been hurt by the year-over-year decline in both the metrics. Results were hurt by reduced trading volumes in U.S. equities and lower contributions to the top line from the Market Making and Execution Services segments.

However, the downside in the first quarter was somewhat mitigated by a decline in operating expenses, mainly due to a more than 42% decline in each of the expenses related to brokerage, exchange, clearance fees and payments for order flow, net as well as the termination of office leases.

Q1 Update

Virtu Financial reported first-quarter 2022 earnings per share (EPS) of $1.27, which outpaced the Zacks Consensus Estimate by a whisker but declined by 37.7% year over year.

VIRT’s operating revenues plunged 30.6% year over year to $505 million in the first quarter. However, the top line beat the consensus mark by 1.9%.

Adjusted EBITDA amounted to $343.8 million, which dropped by 39.1% year over year in the quarter under review.

Total operating expenses of $459.6 million declined by 12.1% year over year.

Virtu Financial, Inc. Price, Consensus and EPS Surprise

Virtu Financial, Inc. Price, Consensus and EPS Surprise
Virtu Financial, Inc. Price, Consensus and EPS Surprise

Virtu Financial, Inc. price-consensus-eps-surprise-chart | Virtu Financial, Inc. Quote

Segmental Update

Market Making: The segment reported a net trading income of $516.4 million, which tumbled 35.6% year over year in the first quarter. Segmental revenues plunged 33.6% year over year to $546.6 million.

Execution Services: The net trading income of the segment decreased by 48.1% year over year to nearly $6 million. Revenues fell 19.8% year over year to $151.7 million in the quarter under review.

Financial Update (as of Mar 31, 2022)

Virtu Financial exited the first quarter with cash and cash equivalents of $564.9 million, which declined by 47.3% from the 2021-end level.

Total assets of $12.5 billion increased 21.3% from the level at 2021-end.

Long-term borrowings, net, amounted to $1.8 billion, up 11.8% from the 2021-end figure.

Total equity slipped 8.8% from the figure at 2021-end to $1.7 billion.

Net cash used in operating activities came in at $255.2 million in the first quarter against the prior-year quarter’s net cash provided by operating activities of $133.9 million.

Share Repurchase and Dividend Update

In the quarter under review, Virtu Financial (as part of its share repurchase program) bought back shares worth $287.2 million. It has around $488.4 million remaining under its share buyback authorization for the future purchase of the shares of Class A Common Stock and Virtu Financial Units.

Concurrently, VIRT’s board of directors approved a quarterly cash dividend of 24 cents per share. The dividend will be paid out on Jun 15, 2022 to its shareholders of record as of Jun 1.

2022 Outlook

Communication and data processing, operations and administrative, and depreciation and amortization expenses are anticipated to match the 2021 figure this year.

Annual interest expenses are projected to increase proportionately to roughly $83 million each year.

Zacks Rank

Virtu Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Finance Sector Releases

Out of the Finance sector players who have reported first-quarter results so far, the bottom line of Synchrony Financial SYF, American Express Company AXP and Discover Financial Services DFS beat the Zacks Consensus Estimate.

Synchrony Financial reported first-quarter 2022 adjusted EPS of $1.73, which surpassed the Zacks Consensus Estimate of $1.53 by 13.1%. The bottom line of SYF remained flat with the year-ago period. Its net interest income increased 10.2% year over year to $3,789 million for the quarter under review. It beat the Zacks Consensus Estimate of $3,764 million. The other income of Synchrony Financial declined by 17.6% year over year to $108 million.

American Express reported first-quarter 2022 earnings of $2.73 per share, which beat the Zacks Consensus Estimate by 12.3%. However, AXP’s bottom line decreased by 0.4% year over year. For the quarter under review, American Express’ total revenues, net of interest expenses, increased 29% year over year to $11.7 billion due to higher Card Member spending. The top line beat the Zacks Consensus Estimate 0.4%. The network volumes of American Express jumped 30% year over year to $350.3 billion for the first quarter.

Discover Financial reported first-quarter 2022 adjusted earnings of $4.22 per share, which beat the Zacks Consensus Estimate by 17.9%. However, the bottom line plunged 16% year over year. DFS’ revenues — net of interest expenses — amounted to $2.9 billion, which improved by 4% year over year. However, the top line missed the consensus mark by 2.5%. The operating efficiency of Discover Financial came in at 38.9%, which improved by 20 basis points year over year in the first quarter.


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