It has been about a month since the last earnings report for Virtu Financial (VIRT). Shares have added about 11% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Virtu Financial due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Virtu Financial Q2 Earnings Surpass, Increase Y/Y
Virtu Financial’s second-quarter 2020 earnings per share of $1.72 beat the Zacks Consensus Estimate by 9.6%. Moreover, the bottom line skyrocketed 975% year over year.
The company benefited from the market volatility amid the COVID-19 outbreak.
Revenues of $669 million soared 180% year over year on the back of heightened market volatility, bid-ask spreads, and trading volumes and asset classes. Moreover, the top line surpassed the consensus mark by 3.4%.
Quarterly Operational Update
Adjusted trading income of the company surged 179.9% to $668.7 million year over year.
In the quarter under review, adjusted EBITDA jumped 444.8% to $485.8 million.
Total operating expenses jumped 13.5% year over year to $501.4 million.
This upside was owing to higher brokerage, exchange and clearance fees, employee compensation and payroll taxes, etc.
Adjusted net trading income from the Marketing Making segment ascended 262.3% year over year in the quarter under review. Under this segment, adjusted net trading income from Global Equities rose 305% year over year while the same from Global FICC, Options and Other climbed 105% year over year.
Adjusted net trading loss from Execution Services was $689 million against the prior-year quarter’s net trading income of $355 million.
The company's board of directors declared a quarterly cash dividend of 24 cents per share, payable Sep 15, 2020 to its shareholders of record as of Sep 1.
As of Jun 30, 2020, the company had total assets worth $10.2 billion, up 7.1% from the level at 2019 end.
It exited the quarter with total equity of $1.7 billion, up 38.4% from the level on Dec 31, 2019.
The company exited the second quarter with $670.7 million of cash and cash equivalents, down 8.4% from the 2019-end level.
In the quarter under review, long-term borrowings dropped 9.7% from the level at 2019 end.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 8.57% due to these changes.
Currently, Virtu Financial has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren’t focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Virtu Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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