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MarketAxess (MKTX) Down 5.8% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for MarketAxess (MKTX - Free Report) . Shares have lost about 5.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is MarketAxess 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.
MarketAxess Q4 Earnings Top on Credit Trading Volume
MarketAxess reported fourth-quarter 2022 earnings per share of $1.58, beating the Zacks Consensus Estimate of $1.53. The bottom line increased 15.3% year over year.
Total revenues of $177.9 million rose 7.8% year over year in the quarter under review and beat the consensus mark of $176 million.
The strong quarterly results were supported by solid growth in credit trading volumes across all product categories of MarketAxess, which provided higher commissions. However, lower total rates trading volumes and escalating operating costs partially offset the upside.
2022 Update
Total revenues of $718.3 million increased 2.8% from 2021 levels, beating our estimate of $716.1 million and the consensus mark of $716.7 million. Total expenses of $391.4 million rose 8.2% from 2021 levels but were lower than our estimate of $397.8 million. The 2022 bottom line of $6.65 per share was down from $6.77 a year ago but beat the Zacks Consensus Estimate of $6.61.
Quarterly Operational Update
Active clients of MarketAxess totaled 2,068 in the fourth quarter, which increased 10% year over year. Active international clients attained a record figure of 1,006 in the quarter under review. The figure advanced 5% year over year.
Commission revenues of $158.4 million increased 8.6% year over year, beating our estimate of $156 million. While information services and other revenues increased 8.8% and 10.6% year over year, respectively, post-trade services revenues fell 5.8%.
MarketAxess’ U.S. high-grade trading volume came in at $334.7 billion, up 20.5% year over year in the fourth quarter and comfortably beating our estimate of $316.3 billion. Rising by 22.4% as that of the trading volume, the average daily volume (ADV) of the same product category came in at $5.5 billion. The figure also beat the Zacks Consensus Estimate of $5.2 billion.
Other credit trading volume of $31.4 billion increased 340.4% year over year. ADV of the same product also increased 347.8% year over year in the quarter under review.
The emerging markets' trading volume and ADV improved 1.3% and 2.9%, respectively, on a year-over-year basis. The total rates trading volume and ADV, however, fell 7% and 5.5%, respectively, year over year in the quarter under review.
Total credit trading of $737.7 billion jumped 22.1% year over year, while ADV of $12 billion rose 24%.
Total rates trading of $1,121.7 billion declined 7% year over year, while ADV of $18.4 billion fell 5.5%.
Total expenses increased 8.4% year over year to $100.2 million, mainly due to elevated employee compensation and benefits and technology and communication expenses, partially offset by a 26.9% decline in professional and consulting fees. Total expenses were slightly lower than our estimate of $106.6 million.
Operating income of $77.7 million advanced 7% year over year in the fourth quarter.
Balance Sheet (as of Dec 31, 2022)
MarketAxess exited the fourth quarter with cash and cash equivalents of $430.7 million, which plunged from the 2021-end level of $506.7 million. Total assets of $1.6 billion increased from the figure of $1.5 billion as of Dec 31, 2021.
It had no outstanding borrowing under its credit facility at 2022-end. Total stockholders’ equity of $1.1 billion increased from the $1 billion level at 2021 end.
Cash Flows
MarketAxess generated cash from operations of $134.2 million in the fourth quarter, which declined from $145.7 million a year ago. However, free cash flows were recorded at $94.1 million, rising from $72 million in the prior-year period.
Dividend Update
Management approved a quarterly cash dividend of 72 cents per share, which will be paid out on Feb 22, to shareholders of record as of Feb 8. The latest dividend indicates 2.9% sequential increase.
2023 Guidance
Expenses for the year are now predicted within $418-$446 million compared with the 2022 level of $391.4 million.
Capital expenditures are expected between $52 million and $58 million.
The effective tax rate is likely to be in the 25-26% range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, MarketAxess has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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. It comes with little surprise MarketAxess has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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MarketAxess (MKTX) Down 5.8% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for MarketAxess (MKTX - Free Report) . Shares have lost about 5.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is MarketAxess 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.
MarketAxess Q4 Earnings Top on Credit Trading Volume
MarketAxess reported fourth-quarter 2022 earnings per share of $1.58, beating the Zacks Consensus Estimate of $1.53. The bottom line increased 15.3% year over year.
Total revenues of $177.9 million rose 7.8% year over year in the quarter under review and beat the consensus mark of $176 million.
The strong quarterly results were supported by solid growth in credit trading volumes across all product categories of MarketAxess, which provided higher commissions. However, lower total rates trading volumes and escalating operating costs partially offset the upside.
2022 Update
Total revenues of $718.3 million increased 2.8% from 2021 levels, beating our estimate of $716.1 million and the consensus mark of $716.7 million. Total expenses of $391.4 million rose 8.2% from 2021 levels but were lower than our estimate of $397.8 million. The 2022 bottom line of $6.65 per share was down from $6.77 a year ago but beat the Zacks Consensus Estimate of $6.61.
Quarterly Operational Update
Active clients of MarketAxess totaled 2,068 in the fourth quarter, which increased 10% year over year. Active international clients attained a record figure of 1,006 in the quarter under review. The figure advanced 5% year over year.
Commission revenues of $158.4 million increased 8.6% year over year, beating our estimate of $156 million. While information services and other revenues increased 8.8% and 10.6% year over year, respectively, post-trade services revenues fell 5.8%.
MarketAxess’ U.S. high-grade trading volume came in at $334.7 billion, up 20.5% year over year in the fourth quarter and comfortably beating our estimate of $316.3 billion. Rising by 22.4% as that of the trading volume, the average daily volume (ADV) of the same product category came in at $5.5 billion. The figure also beat the Zacks Consensus Estimate of $5.2 billion.
Other credit trading volume of $31.4 billion increased 340.4% year over year. ADV of the same product also increased 347.8% year over year in the quarter under review.
The emerging markets' trading volume and ADV improved 1.3% and 2.9%, respectively, on a year-over-year basis. The total rates trading volume and ADV, however, fell 7% and 5.5%, respectively, year over year in the quarter under review.
Total credit trading of $737.7 billion jumped 22.1% year over year, while ADV of $12 billion rose 24%.
Total rates trading of $1,121.7 billion declined 7% year over year, while ADV of $18.4 billion fell 5.5%.
Total expenses increased 8.4% year over year to $100.2 million, mainly due to elevated employee compensation and benefits and technology and communication expenses, partially offset by a 26.9% decline in professional and consulting fees. Total expenses were slightly lower than our estimate of $106.6 million.
Operating income of $77.7 million advanced 7% year over year in the fourth quarter.
Balance Sheet (as of Dec 31, 2022)
MarketAxess exited the fourth quarter with cash and cash equivalents of $430.7 million, which plunged from the 2021-end level of $506.7 million. Total assets of $1.6 billion increased from the figure of $1.5 billion as of Dec 31, 2021.
It had no outstanding borrowing under its credit facility at 2022-end. Total stockholders’ equity of $1.1 billion increased from the $1 billion level at 2021 end.
Cash Flows
MarketAxess generated cash from operations of $134.2 million in the fourth quarter, which declined from $145.7 million a year ago. However, free cash flows were recorded at $94.1 million, rising from $72 million in the prior-year period.
Dividend Update
Management approved a quarterly cash dividend of 72 cents per share, which will be paid out on Feb 22, to shareholders of record as of Feb 8. The latest dividend indicates 2.9% sequential increase.
2023 Guidance
Expenses for the year are now predicted within $418-$446 million compared with the 2022 level of $391.4 million.
Capital expenditures are expected between $52 million and $58 million.
The effective tax rate is likely to be in the 25-26% range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, MarketAxess has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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. It comes with little surprise MarketAxess has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.