On Tuesday, MF Global (MF) released their first quarterly earnings report after listing on the NYSE in July. Recall ZachStocks covered the stock on October 1 as the stock approached the original IPO price. The report came after the stock made a new high Monday, closing at $31.53. By the time trading concluded Tuesday afternoon, the stock had given back over 8% and closed back below the IPO price of $30. Analysts seemed relatively happy with the results but were somewhat surprised by the level of adjustments necessary to come up with a clean earnings figure for the quarter.
After adjusting for litigation, IPO expenses and various other items, it appears the company earned a normalized $0.42 up 68% from the same period last year. Revenue was up sharply on stronger trading during the tumultuous market conditions experienced this summer. The execution only portion of trading volume had a higher percentage gain than the cleared portion. Cleared trades have a higher margin because MF is paid for the additional function of assessing counter-party risk and holding sufficient funds to back that risk. The company also had healthy numbers in its principal transaction business where the brokerage takes the opposite side of clients trades to facilitate liquidity.
One negative item that may have effected the stock price was the lower rate per contract. Wachovia (NASDAQ:WB) noted that in periods of higher volatility and higher transaction rates, many clients likely reached a point where their volume of trades touched off discounts due to contract stipulations. This is actually a good problem to have, as it means clients are pushing more orders through and generating more revenue per account. The phenomenon will likely reverse back to normal levels if we see a bit less volatility in the fourth quarter.