AlphaThe Close: Strong top lines, uneven margins from brokers to freight
Interactive Brokers, J.B. Hunt and Alcoa capped a heavy reporting day, while the Fed's H.15 shows the 2-year yield rising as the long end eased.
- Interactive Brokers earned $0.69 a diluted share versus $0.59 on net revenues of $1.91 billion, with net interest income up 19% to $1.15 billion; the dividend rises to $0.15.
- J.B. Hunt's revenue rose 20% to $3.68 billion, but operating income rose only to $247.1 million from $242.7 million.
- Alcoa's net income attributable to the company rose to $483 million from $232 million a year earlier, though revenue fell from Q2 to $3,704 million.
- TSMC guided Q4 revenue to US$52.3 billion–$54.3 billion after Q3 revenue of US$46.72 billion.
- Per the Fed's H.15, the 10-year yield was 5.19% on October 14 and the 2-year 4.82%, a 37-basis-point spread.
Thursday's reporting day ended with three after-the-bell releases that each tell a different part of the economy's story: a broker living on interest income, a freight carrier moving more boxes for thinner margins, and an aluminum producer coming off a strong second quarter. They followed this morning's producer price and retail sales reports, covered earlier on the wire, and a TSMC report that set the tone for technology.
Interactive Brokers: the rate machine
Interactive Brokers earned $0.69 a diluted share, versus $0.59 a year earlier, on reported net revenues of $1.91 billion against $1.66 billion. Net interest income rose 19% to $1.15 billion, almost twice the $602 million of commission revenue, and the pretax margin was 78%. Customer accounts rose 35% to 5.58 million, customer equity 27% to $964.7 billion, and margin loans 36% to $105.2 billion. The board lifted the quarterly dividend to $0.15 from $0.0875.
J.B. Hunt: volume without leverage
J.B. Hunt's operating revenues rose 20% to $3.68 billion, but operating income rose only to $247.1 million from $242.7 million, and diluted EPS to $1.82 from $1.76. Intermodal loads rose to 585,582 from 539,907 and segment operating income rose 18%, while Dedicated operating income fell 22% and Final Mile operating income fell 76%. Freight demand is not the problem; cost and pricing are.
Alcoa: strong year, softer quarter
Alcoa reported net income attributable to the company of $483 million, or $1.81 a share, versus $232 million, or $0.88, a year earlier. Revenue of $3,704 million was well above the $2,995 million of a year ago but below $3,966 million in the second quarter, and adjusted EBITDA excluding special items slipped to $789 million from $901 million. The company reaffirmed 2026 aluminum production of 2.4 to 2.6 million metric tons.
Chips and rates
TSMC set the morning tone with third-quarter revenue of NT$1,494.24 billion, up 50.9% from a year earlier, a 66.4% gross margin, and fourth-quarter revenue guidance of US$52.3 billion to US$54.3 billion against US$46.72 billion in the third quarter. In rates, the Fed's H.15 shows the 10-year Treasury yield at 5.19% on October 14, down from 5.21%, while the 2-year rose to 4.82% from 4.79%, narrowing the 2s10s spread to 37 basis points. The 10-year real yield fell to 2.84%.
AlphaGen's read: the common thread is that nominal growth is strong almost everywhere, from broker balances to freight volumes to chip revenue, but conversion into profit depends on cost exposure. Interest-rich and pricing-power businesses are capturing it; asset-heavy operators facing fuel and labor costs are not. Import prices and industrial production are due Friday morning.
For informational purposes only. Not investment advice. See disclosures.