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Virtu Financial (VIRT) Declines 5.8% Since Q4 Earnings Miss

Virtu Financial, Inc.’s VIRT shares fell 5.8% since it reported weak fourth-quarter results on Jan 26. Lower commissions and trading income, and higher interest and dividend expenses affected the results. Further, weaker performance in the Market Making and Execution Services units hurt the company. The negatives were partially offset by lower operating expenses.

Virtu Financial reported fourth-quarter 2022 adjusted earnings per share (EPS) of 37 cents, which missed the Zacks Consensus Estimate of 53 cents and our estimate of 40 cents. Also, the EPS fell from $1.19 a year ago.

VIRT’s adjusted net trading income of $274.1 million in the fourth quarter fell from $485.6 million a year ago. Also, the metric missed the consensus mark of $300 million and our estimate of $285.9 million.

Virtu Financial, Inc. Price, Consensus and EPS Surprise

 

Virtu Financial, Inc. Price, Consensus and EPS Surprise
Virtu Financial, Inc. Price, Consensus and EPS Surprise

Virtu Financial, Inc. price-consensus-eps-surprise-chart | Virtu Financial, Inc. Quote

Q4 Performance

Revenues from commissions, net and technology services declined to $117.9 million from $143.8 million a year ago. It also missed the Zacks Consensus Estimate of $142 million. Interest and dividends income rose to $63.7 million in the fourth quarter from $49.1 million a year ago and beat the consensus estimate of $23 million.

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Adjusted EBITDA amounted to $125.4 million, which fell from $328.4 million in the prior-year quarter. The adjusted EBITDA margin plunged to 45.8% from 67.6% a year ago.

Total operating expenses of $458.1 million decreased from the year-ago level of $478.6 million. VIRT recorded decreases in costs related to employee compensation and payroll taxes and brokerage, exchange and clearance fees, and payments for order flow. This was partially offset by higher operations and administrative, communication and data processing, and interest and dividends expenses.

Segmental Update

Market Making: The segment reported a net trading income of $308.7 million, which declined from $508.3 million in the prior-year period. Segmental total revenues fell to $385.8 million from $567.5 million in the fourth quarter of 2021.

Execution Services: The net trading income of the segment decreased to $4.6 million from $5 million a year ago. Total revenues fell to $111.9 million in the quarter under review from $140.3 million due to significantly lower revenues from commissions, net, and technology services.

Financial Update (as of Dec 31, 2022)

Virtu Financial exited the fourth quarter with cash and cash equivalents of $982 million, which declined from the 2021-end level of $1,071.5 million. Total assets of $10,583 million increased from $10,320 million at 2021-end.

Long-term borrowings, net, amounted to $1,796 million, up from the 2021-end figure of $1,605.1 million. Short-term borrowings, net, at the fourth-quarter end were $4 million.

Total equity slipped from $1,863.6 million at 2021-end to $1,635 million.

Share Repurchase and Dividend Update

In the quarter under review, Virtu Financial (as part of its share repurchase program) bought back shares worth $45.3 million. It had $311.9 million remaining under its share buyback authorization for future purchases of the shares of Class A Common Stock and Virtu Financial Units.

Concurrently, VIRT’s board of directors approved a quarterly cash dividend of 24 cents per share. The dividend will be paid out on Mar 15, 2023, to its shareholders of record as of Mar 1.

Guidance

For 2023, VIRT expects cash operating costs to remain stable or rise 1-2%.

Zacks Rank & Stocks to Consider

Virtu Financial currently has a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader finance space are Cboe Global Markets, Inc. CBOE, American International Group, Inc. AIG and Ares Capital Corporation ARCC, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chicago-based Cboe Global Markets is one of the largest stock exchange operators by volume in the United States. The Zacks Consensus Estimate for CBOE’s 2022 earnings indicates a 14.2% year-over-year increase.

Headquartered in New York, American International is a leading global insurance organization. The Zacks Consensus Estimate for AIG’s 2022 earnings has increased 1.8% in the past 30 days.

Based in Los Angeles, Ares Capital specializes in rescue financing of middle-market companies. The Zacks Consensus Estimate for ARCC’s 2022 earnings suggests 18.1% year-over-year growth.

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Virtu Financial, Inc. (VIRT) : Free Stock Analysis Report

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