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Why Is Virtu Financial (VIRT) Up 11% Since Last Earnings Report?

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It has been about a month since the last earnings report for Virtu Financial (VIRT - Free Report) . 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 its most recent earnings report in order to get a better handle on the important catalysts.

VirtuFinancial's Q1 Earnings Top Estimates, Fall Y/Y

VirtuFinancial's first-quarter 2021 earnings per share of $2.04 beat the Zacks Consensus Estimate of $1.30 by 56.9% owing to reduced expenses. However, the bottom line dipped 0.5% year over year.

Operating revenues of $728 million decreased 7.2% year over year due to poor performance by its Marketing Making segment. However, the top line beat the consensus mark by 32.1%, driven by higher trading volumes in U.S. equities despite lower volatility.

Quarterly Operational Update

In the quarter under review, adjusted EBITDA slipped 0.9% to $564.7 million.

Total operating expenses slid 2.2% year over year to $522.8 million. This is driven by lower communication and data processing, employee compensation and payroll taxes, interest and dividends expense, etc.

However, the same was partly offset by brokerage, exchange, clearance fees and payments for order flow, net.

Segmental Update

Adjusted net trading income from the Marketing Making segment was down 11.8% year over year to $575.1 million in the quarter under review.
Adjusted net trading income from Execution Services came in at $152.9 million, up 15.7% year over year.

Dividend and Share Repurchase Update

The company's board of directors declared a quarterly cash dividend of 24 cents per share to be paid out on Jun 15, 2021 to its shareholders of record as of Jun 1.

The board members sanctioned the enhancement of share buyback plan to $470 million. It even extended the duration of the same through May 4, 2022.

Virtu Financial has around $319 million remaining capacity for future purchases of shares of Class A Common Stock and Virtu Financial Units under the program.

Financial Update (as of Mar 31, 2021)

The company had total assets worth $10.8 billion, up 9.3% from the level at 2020 end.

It exited the first quarter with total equity of $2 billion, up 10.2% from the level on Dec 31, 2020.

The company exited the first quarter with $899 million of cash and cash equivalents, up 1.1% from the 2020-end level.

In the quarter under review, long-term borrowings dipped 0.2% to $1.6 billion from the level at 2020 end.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, Virtu Financial has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Virtu Financial has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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