Interactive Brokers Group Inc.
) second quarter 2012 earnings per share of 17 cents lagged the
Zacks Consensus Estimate by a nickel. Also, this compared
unfavorably with the year-ago quarter's earnings of 22 cents.
After considering the effect of changes in the U.S. dollar value of
Interactive's non-U.S. subsidiaries, earnings came in at 9 cents
per share compared with 31 cents in the year-ago quarter.
Interactive's results were impacted by deterioration in net revenue
along with higher operating expenses. Moreover, the performance of
the Market Making segment was on the downside with substantially
lower revenue. However, slightly better revenue in the Electronic
Brokerage segment was a positive.
For the quarter under review, Interactive's net income available to
common shareholders was $8.0 million, down 15.7% from $9.5 million
in the year-ago quarter.
Behind the Headlines
For the reported quarter, Interactive's net revenue came in at
$260.9 million, declining 12.1% year over year from $296.9 million.
The dip was primarily attributable to lower interest income along
with significant fall in trading gains, partially mitigated by
higher commission and execution fees. Net revenue was also much
lower than the Zacks Consensus Estimate of $287.0 million.
Net income before taxes dropped 27.2% year over year to $108.5
million. Pre-tax profit margin was 42% in the quarter as against
50% in the prior-year quarter.
Total non-interest expenses were $152.4 million, up 3.1% from
$147.8 million in the previous-year quarter. The rise was mainly
due to higher employee compensation and benefits along with
execution and clearing charges, partially offset by a reduction in
general and administrative expenses.
Net revenue decreased 27.4% to $91.3 million from $125.8 million in
the previous-year quarter. Pre-tax income fell 59.5% year over year
to $24.0 million as a result of currency translation loss. Further,
pre-tax profit margin declined to 26% from 47% recorded in the
Net revenue inched up 1.0% year over year to $171.4 million.
Similarly, pre-tax income stood at $90.2 million, marginally
growing 1.3% from the previous-year quarter. Pre-tax profit margin
was 53% compared with 52% in the prior-year quarter. Additionally,
total daily average revenue trades (DARTs) for cleared and
execution-only customers grew 5.0% year over year to 427,000.
Concurrent with the earnings release, Interactive's Board of
Directors declared a quarterly cash dividend of 10 cents per share.
The dividend will be paid on September 14, to shareholders of
record as on August 31.
Despite poor results, we believe that Interactive's strong
fundamentals and highly liquid balance sheet will enhance
investors' confidence on the stock. Moreover, the company has been
constantly declaring dividends, which reflects its healthy capital
However, with lower trading activity in the markets, Interactive's
financials may get adversely affected as its revenue is highly
dependent on the trading volume at the stock exchanges.
Interactive currently holds a Zacks #4 Rank, which translates into
a short-term Sell rating. Considering the fundamentals, we maintain
a long-term 'Neutral' recommendation on the stock.
Among Interactive's peers,
GFI Group Inc.
Stifel Financial Corp.
) are expected to announce their second quarter results on July 24
and August 6, respectively.
GFI GROUP INC (GFIG): Free Stock Analysis
INTERACTIVE BRK (IBKR): Free Stock Analysis
STIFEL FINL (SF): Free Stock Analysis Report
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