Interactive Brokers Group, Inc. (IBKR) Down 2.1% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Interactive Brokers Group, Inc. (IBKR). Shares have lost about 2.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Interactive Brokers Group, Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Interactive Brokers Q3 Earnings Beat Estimates, Costs Up

Interactive Brokers’ third-quarter 2022 adjusted earnings per share of $1.08 handily surpassed the Zacks Consensus Estimate of 99 cents. The bottom line reflects a rise of 38.5% from the prior-year quarter.

Results were primarily aided by an improvement in revenues. Also, the capital position remained strong. However, higher expenses and a fall in DARTs were headwinds.

After considering non-recurring items, net income available to common shareholders (GAAP basis) was $99 million or 97 cents per share, up from $42 million or 43 cents per share in the prior-year quarter.

Interactive Brokers reported comprehensive income available to common shareholders of $69 million or 68 cents per share compared with $33 million or 34 cents in the prior-year quarter.

Revenues Improve, Expenses Rise

Total GAAP net revenues were $790 million, up 70.3% year over year. However, the top line missed the Zacks Consensus Estimate of $812.6 million. Adjusted net revenues were $847 million, up 30.3%.

Total non-interest expenses increased 16.1% year over year to $267 million. The rise was due to an increase in almost all cost components except for general and administrative costs.

Income before income taxes was $523 million, increasing significantly from the prior-year quarter’s $234 million.

The adjusted pre-tax profit margin was 68%, up from 65% a year ago.

In the reported quarter, total customer DARTs declined 15.2% year over year to 1.92 million. Total cleared DARTs decreased from 2.02 million to 1.71 million.

Customer accounts grew 31% from the year-ago quarter to 2,012,000.

Capital Position Strong

As of Sep 30, 2022, cash and cash equivalents (including cash and securities set aside for regulatory purposes) totaled $59.92 billion compared with $40.40 billion as of Dec 31, 2021.

As of Sep 30, 2022, total assets were $114.68 billion compared with $109.11 billion as of Dec 31, 2021. Total equity was $10.90 billion, up from $10.22 billion as of Dec 31, 2021.

Outlook

Given market expectations of more rate hikes to come, management anticipates the effects of increases in the Fed Funds rate to result in additional annual net interest income (NII) as follows: at 25 basis points (bps), an increase of $55 million; at 50 bps, an increase of $110 million; at 75 bps, an increase of $166 million; and at 100 bps, an increase of $221 million.

Further, the company assumes that a 25 bps increase in all the relevant non-USD benchmark rates will lead to an additional annual NII of $14 million, and rising to nearly $56 million at a 100 bps rate increase.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

The consensus estimate has shifted 5.61% due to these changes.

VGM Scores

Currently, Interactive Brokers Group, Inc. has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Interactive Brokers Group, Inc. has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Interactive Brokers Group, Inc. belongs to the Zacks Financial - Investment Bank industry. Another stock from the same industry, The Charles Schwab Corporation (SCHW), has gained 12.7% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

The Charles Schwab Corporation reported revenues of $5.5 billion in the last reported quarter, representing a year-over-year change of +20.4%. EPS of $1.10 for the same period compares with $0.84 a year ago.

The Charles Schwab Corporation is expected to post earnings of $1.08 per share for the current quarter, representing a year-over-year change of +25.6%. Over the last 30 days, the Zacks Consensus Estimate has changed -4.6%.

The Charles Schwab Corporation has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

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