StoneX Stock (SNEX) Moves Sharply Lower, Profitability Squeezed by Acquisition Costs

StoneX Group's stock (SNEX) is pulling back sharply today, with a drop of 15.34% on the session coming hot on the heels of recent highs of $100.40. The company reported earnings that missed a beat fiscal for Q3. While revenue growth was solid, earnings were pressured by acquisition-related expenses, missing expectations by more than 10%.

The firm posted EPS of $1.22, slightly below the $1.25 reported in the same quarter last year and missing the street's expectations of $1.39. Whilst revenue jumped to $33.8 billion from $26.1 billion in the prior year, showcasing significant top-line expansion, it was not enough for a stock that had almost doubled in the 12 months leading into earnings.

Looking into the numbers, net operating revenues increased 4% to $488.3 million, while net income reached $63.4 million. StoneX's return on equity (ROE) for the quarter stood at 13.1%.

A key factor impacting earnings was $8.9 million in acquisition-related charges. These included $6.5 million in bridge loan financing costs and $2.4 million in professional fees, collectively reducing diluted EPS by approximately $0.12 for the quarter. Even with these $0.12, StoneX would have been still been 5 cents short of street expectaions.

StoneX completed two significant acquisitions during the quarter: R.J. O'Brien, the oldest futures brokerage in the U.S., and The Benchmark Company, LLC, a full-service investment banking firm.

R.J. O'Brien generated approximately $766 million in revenue and $170 million in EBITDA for 2024. These acquisitions are expected to bolster StoneX’s presence in global derivatives and expand its capital markets capabilities.

CEO Sean O'Connor noted, “The diversity of our business model was on display in our third quarter results, as significant growth in our Institutional segment net operating revenues, most notably in equity markets, combined with a strong performance in our Self-Directed/Retail segment, more than offset declines in our Commercial businesses due to diminished commodity volatility and tariff related uncertainty.” StoneX's diversified business model appears to be a key strength, allowing it to navigate sector-specific challenges.