Interactive Brokers missed earnings estimates for the third quarter late Tuesday after Charles Schwab ended a string of quarterly earnings declines early Tuesday. Interactive Brokers stock fell on Wednesday.
Charles Schwab stock gapped up above a key level and a trendline entry on Tuesday. Interactive Brokers shares and BlackRock rose in Tuesday's regular session to record highs.
Interactive Brokers Earnings And Stock Action
For Q3, the online broker delivered EPS of $1.75, rising 13% year over year. Sales increased 19% to $1.365 billion. Wall Street was expecting Interactive Brokers earnings per share of $1.82 on revenue of $1.337 billion, FactSet shows.
Revenue from commissions jumped 31% during the quarter due to higher customer trading volumes, the company said. Net interest income grew 8%. Customer accounts surged 28%. Total DARTs (daily average revenue trades) soared 42%.
But general and administrative expenses jumped 67% in the third quarter. The company cited "a one-time charge of $12 million related to the consolidation of our European subsidiaries and a $9 million increase related to legal and regulatory matters."
Analysts forecast a 21% EPS gain for the full year, vs. 42% growth in 2023, followed by a 2% earnings slip in 2025, FactSet shows.
Interactive Brokers shares lost 2.8% on the stock market today. The brokerage stock rose 1.1% on Tuesday ahead of the Q3 report, setting a 52-week high intraday.
The brokerage, a favorite of high-volume traders, has benefited from still-rising markets. It reported sharp increases in client accounts and Daily Average Revenue Trades for every month of the third quarter. It also says new products (such as forecast contracts on the 2024 U.S. elections) allow investors to hedge against political volatility and to take positions on key political and economic outcomes. The company processes trades in stocks, options, futures and more.
After Thursday's dip, Interactive Brokers stock has pared gains in 2024 so far to 80.1%.
Four analysts raised their price targets on the broker in October, FactSet shows. IBKR stock is now up 17% from a Sept. 13 breakout past 129.19. It earns a perfect 99 Composite Rating and 94 RS Rating.
Charles Schwab Earnings Driven By Rising Markets
For Q3, Charles Schwab earnings per share came in at 77 cents, flat vs. a year earlier and ahead of views. That ended a five-quarter streak of declining profit. Revenue rose 5.2% to $4.85 billion, also beating. For Q3, analysts had expected a 2% earnings drop to 75 cents per share, according to FactSet. Revenue was seen growing 3.9%, year over year, to $4.786 billion.
Before the Q3 report, analysts projected a 2% EPS decline for the full year and a 23% rebound in 2025.
In Q3, net interest revenue fell 1% year over year, while trading revenue rose 4%, the Charles Schwab earnings release showed. Revenue from asset management fees jumped 21% vs. a year ago and grew 7% vs. the prior second quarter. Schwab CFO Mike Verdeschi tied Q3's 5% total revenue gain to "sustained
investor engagement and market performance."
Charles Schwab Stock Gaps Up
Shares of Charles Schwab surged 6.1% to 71.96 on Tuesday, gapping above the 200-day moving average. Schwab stock also cleared a trendline entry just below 72, though it came off intraday highs. The stock is still working on a 79.49 consolidation buy point.
BlackRock stock gained 1.6% on Tuesday, pegging a new high intraday.
Last week, BlackRock crushed Q3 estimates as assets under management crossed $11.4 trillion. But BlackRock, the world's largest asset manager, reported fees under pressure due to a shift to lower-cost investments. Schwab also runs an asset management business. Their index funds allow U.S. workers to save and invest money for retirement.
Schwab's Sweep Cash Stabilizing After Fed Rate Cuts
Significantly, Schwab's Q3 client transactional sweep cash grew by $9 billion vs. the prior quarter, driven by September inflows. The Fed cut interest rates that month for the first time since 2020. "This provides good evidence that a declining interest rate environment should lead to stable to inflecting sweep cash levels," William Blair analyst Jeff Schmitt wrote in a note to clients on Tuesday.
He called signs of stabilizing sweep cash the "highlight" of the Schwab earnings report. It saw "the first month-over-month increase since early 2022 before Fed rate hikes began," he explained.
Please follow Aparna Narayanan on X @IBD_Aparna for more coverage.
