Record-High IBKR Stocks Take a Hit as Q3 Earnings Miss Wall Street Expectations

Wednesday, 16/10/2024 | 04:49 GMT by Arnab Shome

Interactive Brokers turned a quarterly EPS of $1.81, but market estimations were at $1.82.

However, the brokerage improved on all metrics when compared year-over-year.

IBKR stock drops about 4% in after-hours trading sessions: Source: Google Finance

Interactive Brokers (Nasdaq: IBKR) ended the three months between July and September with net revenue of $1.36 billion, an increase of 19.2 percent year-over-year. Its pre-tax income also jumped to $987 million from the previous year’s corresponding quarter’s $840 million. However, it missed the earnings estimates, resulting in a decline in its stock in after-hours trading.

Street Estimation Miss Costs Heavily

For the third quarter, the online broker delivered earnings per share of $1.81, an improvement from the previous year’s $1.56. Considering the adjusted figures, the EPS improved to $1.75 from $1.55. Wall Street was expecting the broker to turn an EPS of $1.82 on revenue of $1.337 billion, according to FactSet.

The street estimation miss resulted in the decline of IBKR share prices by almost 4 percent in after-hours trading. Interestingly, the stock gained more than 68 percent year-to-date and was trading at its peak.

Income Jumped, But There Were Expenses

According to the official figures published yesterday (Tuesday), the brokerage operator's commission revenue increased by 31 percent to $435 million due to higher customer trading volumes. The figures highlighted that the trading volumes of options, stocks, and futures jumped by 35 percent, 22 percent, and 13 percent, respectively.

Furthermore, the company's net interest income also increased by 9 percent to $802 million, boosted by higher customer margin loans and customer credit balances. Customer credit on the brokerage platform jumped by 19 percent to $116.7 billion, while customer margin loans increased by 28 percent to $55.8 billion.

It also generated $72 million from other fees and services, which was 38 percent higher than the previous year.

On the other hand, the expenses around execution, clearing, and distribution fees increased 18 percent to $116 million. Additionally, general and administrative expenses increased 67 percent to $75 million. The company faced a $12 million one-time charge for consolidating its European subsidiaries and a $9 million increase in legal and regulatory expenses.

The online broker also managed to improve other business metrics. Customer accounts increased by 2.87 percent to 3.12 million, customer equity gained 46 percent to $541.5 billion, and total DARTs increased by 42 percent to 2.7 million.