This Crazy Market is Great for Virtu Financial

Discussion in 'Wall St. News' started by ajacobson, Feb 8, 2018.

  1. From Barrons about an hour ago

    This Crazy Market is Great for Virtu Financial
    By
    Bill Alpert
    Feb. 8, 2018 3:23 p.m. ET

    The market may be tanking, but shares of the electronic market maker Virtu Financial (VIRT) have leapt 25%, to a recent $25, as the New York firm soundly beat expectations for its December quarter. Bulls and bears may be getting pummeled in this suddenly volatile market, but middle men can apparently do fine.

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    Analysts surveyed by IBES had expected December quarter trading revenues of around $200 million. Virtu beat that handily when it reported $237 million. The consensus earnings forecast was for 12 cents a share; it earned 22 cents (after certain non-cash adjustments). Compared to December 2016, revenues increased 170%, while per-share earnings rose 27%. For the full year of 2017, trading revenue was $556 million and adjusted earnings were 57 cents a share. Along with its regular 24 cents a share quarterly dividend, the company announced a surprise $50 million stock buyback. Virtu has about $275 million in excess capital (after accounting for planned debt reduction), so additional buybacks or debt pay-downs could be in the offing.

    Reporting its first full quarter since acquiring rival KCG Holdings in July 2017, Virtu boasted that it earnings to $3.6 million a day in the fourth quarter, compared to $2.7 million in the third quarter. The combination has greatly increased the market maker’s heft, increasing its trading income on American stocks by 350% and on foreign shares by 67%, compared to the year earlier.

    Analyst Richard Repetto, of Sandler O’Neill, believes that heightened market volatility will be great for Virtu. "Given the improved volatility metrics & strong retail/institutional volumes in January and "extreme" market movements in Feb to date, we think 1Q18 is shaping up to be an "outsized" quarter," he wrote in a note today.

    December’s results and a roiling market prompted the analyst to raise his estimates for this year and next. Repetto thinks Virtu could crank out earnings of $1.51 a share in 2018, and $1.85 in 2019 -- which would mean that Virtu trades for just 13-times next year’s forecast, while sporting a nice 4% dividend yield.

    Who says these are unsettling times?
     
    murray t turtle likes this.