Knight Capital Group (NYSE:KCG) Comp, Benefit Costs Rise, Faces Downward Pressure

The latest quarterly results of Knight Capital Group (NYSE:KCG) revealed the company is having troubles containing costs, especially with comp and benefits.

Barclays says, "Overall, we view the results as fairly disappointing, but with some bright spots. Most notably, revenues came in higher than we were looking for, helped by a 1.1bps capture rate on the quarter. Despite the solid revenue performance, expenses were materially higher than we expected, driven by higher-than-expected comp and benefits, pushing the comp-to-revenue ratio higher to 54%. While the results fell short of expectations, we believe KCG continues to execute on a number of growth initiatives and is beginning to see traction in some areas.

"Our FY11 EPS estimate moves slightly lower to $1.18 from $1.20 as we flow through the impacts from the quarter, more specifically, a higher expense base moving forward and continued pressure on FICC revenues, partially offset by positive capture rate trends, which we expect to continue through 2011."

Barclays reiterates an "Equalweight" rating on Knight Capital Group (KCG), which closed Friday at $13.66, losing $0.58, or 4.07 percent. Barclays has a price target of $15 on Knight Capital.