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Nasdaq (NDAQ) Down 0.7% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Nasdaq (NDAQ - Free Report) . Shares have lost about 0.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Nasdaq due for a breakout? 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.
Nasdaq Beats on Q2 Earnings, Narrows Expense Guidance
Nasdaq reported second-quarter 2020 adjusted earnings per share of $1.54, which beat the Zacks Consensus Estimate of $1.45 by 6.2%. The bottom line increased 26.2% year over year.
The company witnessed growth in Market Services segment and non-trading revenues. Strategic acquisitions contributed to revenues in the quarter.
Performance in Detail
Nasdaq’s revenues of $699 million increased 12% year over year. The upside was primarily attributable to a $50 million positive impact from organic growth in the Market Services segment, a $25 million positive impact from organic growth in the non-trading segments and a $3 million increase from the inclusion of revenues from acquisitions. The top line beat the Zacks Consensus Estimate by 1.8%.
Adjusted operating expenses were $327 million in the reported quarter, up 2% from the year-ago period owing to $7 million increase from the impact of acquisitions as well as higher compensation expense. However, lower general, administrative and other costs, decreased marketing and advertising expense and a favorable impact from foreign exchange of $2 million were partial offsets.
Operating margin of 53% expanded 500 basis points year over year.
In the U.S. market, Nasdaq welcomed 55 new listings, including 42 IPOs. Nasdaq's Nordic and Baltic exchanges and Nasdaq First North added 13 new listings, including 9 IPOs.
Segment Details
Net revenues at Market Services were up 22% from the year-ago quarter to $276 million. This upside was due to higher revenues from cash equity trading.
Revenues at Corporate Services increased 2% year over year to $126 million, driven by higher corporate solutions revenues.
Information Services revenues rose 10% year over year to $213 million. Higher market data revenues, index revenues as well as investment data & analytics revenues drove the upside.
Revenues at Market Technology increased 6% year over year to $84 million, driven by higher SaaS surveillance revenues.
Financial Update
Nasdaq had cash and cash equivalents of $711 million as of Jun 30, 2020, up 114.2% from the 2019-end level. As of Jun 30, 2020, long-term debt increased 16.2% from 2019-end level to $3.4 billion.
During the reported quarter, Nasdaq issued a $500 million 30-year bond and repaid all commercial paper and borrowings under its revolver. This helped to lower leverage while improving its available liquidity.
As of Jun 30, 2020, Nasdaq had $480 million remaining under its share repurchase authorization.
Guidance Narrowed
Nasdaq expects 2020 non-GAAP operating expense in the range of $1.33 billion to $1.36 billion, compared with $1.32 billion to $1.37 billion guided earlier. This reflects lower corporate travel, lower event spending and delays in hiring, partially offset by unfavorable changes in foreign exchange rates
Non-GAAP tax rate is estimated to be in the range of 25.5% to 27.5% in 2020.
Dividend Update
The board of directors announced quarterly dividend of 49 cents per share. The dividend will be paid out on Sep 25 to shareholders of record as of Sep 11, 2020.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
Currently, Nasdaq has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, Nasdaq has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Nasdaq (NDAQ) Down 0.7% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Nasdaq (NDAQ - Free Report) . Shares have lost about 0.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Nasdaq due for a breakout? 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.
Nasdaq Beats on Q2 Earnings, Narrows Expense Guidance
Nasdaq reported second-quarter 2020 adjusted earnings per share of $1.54, which beat the Zacks Consensus Estimate of $1.45 by 6.2%. The bottom line increased 26.2% year over year.
The company witnessed growth in Market Services segment and non-trading revenues. Strategic acquisitions contributed to revenues in the quarter.
Performance in Detail
Nasdaq’s revenues of $699 million increased 12% year over year. The upside was primarily attributable to a $50 million positive impact from organic growth in the Market Services segment, a $25 million positive impact from organic growth in the non-trading segments and a $3 million increase from the inclusion of revenues from acquisitions. The top line beat the Zacks Consensus Estimate by 1.8%.
Adjusted operating expenses were $327 million in the reported quarter, up 2% from the year-ago period owing to $7 million increase from the impact of acquisitions as well as higher compensation expense. However, lower general, administrative and other costs, decreased marketing and advertising expense and a favorable impact from foreign exchange of $2 million were partial offsets.
Operating margin of 53% expanded 500 basis points year over year.
In the U.S. market, Nasdaq welcomed 55 new listings, including 42 IPOs. Nasdaq's Nordic and Baltic exchanges and Nasdaq First North added 13 new listings, including 9 IPOs.
Segment Details
Net revenues at Market Services were up 22% from the year-ago quarter to $276 million. This upside was due to higher revenues from cash equity trading.
Revenues at Corporate Services increased 2% year over year to $126 million, driven by higher corporate solutions revenues.
Information Services revenues rose 10% year over year to $213 million. Higher market data revenues, index revenues as well as investment data & analytics revenues drove the upside.
Revenues at Market Technology increased 6% year over year to $84 million, driven by higher SaaS surveillance revenues.
Financial Update
Nasdaq had cash and cash equivalents of $711 million as of Jun 30, 2020, up 114.2% from the 2019-end level. As of Jun 30, 2020, long-term debt increased 16.2% from 2019-end level to $3.4 billion.
During the reported quarter, Nasdaq issued a $500 million 30-year bond and repaid all commercial paper and borrowings under its revolver. This helped to lower leverage while improving its available liquidity.
As of Jun 30, 2020, Nasdaq had $480 million remaining under its share repurchase authorization.
Guidance Narrowed
Nasdaq expects 2020 non-GAAP operating expense in the range of $1.33 billion to $1.36 billion, compared with $1.32 billion to $1.37 billion guided earlier. This reflects lower corporate travel, lower event spending and delays in hiring, partially offset by unfavorable changes in foreign exchange rates
Non-GAAP tax rate is estimated to be in the range of 25.5% to 27.5% in 2020.
Dividend Update
The board of directors announced quarterly dividend of 49 cents per share. The dividend will be paid out on Sep 25 to shareholders of record as of Sep 11, 2020.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
Currently, Nasdaq has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, Nasdaq has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.