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Why Is Nasdaq (NDAQ) Down 7.3% Since Last Earnings Report?
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It has been about a month since the last earnings report for Nasdaq (NDAQ - Free Report) . Shares have lost about 7.3% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Nasdaq Surpasses Q4 Earnings and Revenue Estimates
Nasdaq reported fourth-quarter 2019 adjusted earnings per share of $1.29, beating the Zacks Consensus Estimate of $1.27 by nearly 1.6%. The bottom line increased 2.4% year over year.
Nasdaq witnessed growth in non-trading revenues. Strategic acquisitions contributed to revenues in the quarter. The company continued to deliver solid growth in its expanded technology and analytics offerings while benefiting from rising equities market share and a dynamic trading and IPO environment.
Performance in Detail
Nasdaq’s revenues of $646 million increased 0.2% year over year. The upside was primarily attributable to a $22 million positive impact from organic growth in the non-trading segments and a $15 million increase from the inclusion of revenues from acquisitions, partially offset by a $21 million organic decrease in Market Services revenues, a $10 million negative impact from divestitures and a $5 million unfavorable impact from changes in exchange rates. Organic revenues grew 8%. The top line beat the Zacks Consensus Estimate by 0.8%.
Adjusted operating expenses were $335 million, up 2% from the year-ago period owing to an $8 million organic expense increase and a $1 million increase from the net impact of acquisitions and divestitures, partially offset by a $4 million favorable impact from changes in foreign exchange rates.
Operating margin of 49% expanded 100 basis points year over year.
In the U.S. market, Nasdaq witnessed 107 new listings, including 50 IPOs.
Nasdaq's European exchanges added 17 new listings, including 12 IPOs, and added 53 new listings including 34 IPOs in 2019.
Segment Details
Net revenues at Market Services were down 9.6% from the year-ago quarter to $225 million. This downside was largely due to lower revenues from equity derivative trading and clearing.
Revenues at Corporate Services increased 4.9% year over year to $129 million, driven by higher listings services revenues as well as corporate solutions revenues.
Information Services revenues rose 3.7% year over year to $194 million.
Higher index revenues and investment data & analytics revenues drove the upside.
Revenues at Market Technology increased 28.9% year over year to $98 million, largely riding on Cinnober acquisition and organic growth.
Financial Update
Nasdaq had cash and cash equivalents of $332 million as of Dec 31, 2019, down 39.1% from 2018-end level. As of Dec 31, 2019, long-term debt increased 1.3% from 2018-end level to $3 billion.
Capital Deployment
The company paid out $305 million in dividend and spent $200 million in share buybacks during the fourth quarter.
As of Dec 31, 2019, Nasdaq had $632 million remaining under its share repurchase authorization.
Dividend Update
The board of directors announced quarterly dividend of 47 cents per share.
Guidance
Nasdaq provided 2020 non-GAAP operating expense guidance in the range of $1.31 billion to $1.36 billion.
Non-GAAP tax rate is estimated to be in the range of 25.5% to 27.5% in 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
At this time, Nasdaq has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, 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 trending upward for the stock, and the magnitude of this revision 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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Why Is Nasdaq (NDAQ) Down 7.3% Since Last Earnings Report?
It has been about a month since the last earnings report for Nasdaq (NDAQ - Free Report) . Shares have lost about 7.3% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Nasdaq Surpasses Q4 Earnings and Revenue Estimates
Nasdaq reported fourth-quarter 2019 adjusted earnings per share of $1.29, beating the Zacks Consensus Estimate of $1.27 by nearly 1.6%. The bottom line increased 2.4% year over year.
Nasdaq witnessed growth in non-trading revenues. Strategic acquisitions contributed to revenues in the quarter. The company continued to deliver solid growth in its expanded technology and analytics offerings while benefiting from rising equities market share and a dynamic trading and IPO environment.
Performance in Detail
Nasdaq’s revenues of $646 million increased 0.2% year over year. The upside was primarily attributable to a $22 million positive impact from organic growth in the non-trading segments and a $15 million increase from the inclusion of revenues from acquisitions, partially offset by a $21 million organic decrease in Market Services revenues, a $10 million negative impact from divestitures and a $5 million unfavorable impact from changes in exchange rates. Organic revenues grew 8%. The top line beat the Zacks Consensus Estimate by 0.8%.
Adjusted operating expenses were $335 million, up 2% from the year-ago period owing to an $8 million organic expense increase and a $1 million increase from the net impact of acquisitions and divestitures, partially offset by a $4 million favorable impact from changes in foreign exchange rates.
Operating margin of 49% expanded 100 basis points year over year.
In the U.S. market, Nasdaq witnessed 107 new listings, including 50 IPOs.
Nasdaq's European exchanges added 17 new listings, including 12 IPOs, and added 53 new listings including 34 IPOs in 2019.
Segment Details
Net revenues at Market Services were down 9.6% from the year-ago quarter to $225 million. This downside was largely due to lower revenues from equity derivative trading and clearing.
Revenues at Corporate Services increased 4.9% year over year to $129 million, driven by higher listings services revenues as well as corporate solutions revenues.
Information Services revenues rose 3.7% year over year to $194 million.
Higher index revenues and investment data & analytics revenues drove the upside.
Revenues at Market Technology increased 28.9% year over year to $98 million, largely riding on Cinnober acquisition and organic growth.
Financial Update
Nasdaq had cash and cash equivalents of $332 million as of Dec 31, 2019, down 39.1% from 2018-end level. As of Dec 31, 2019, long-term debt increased 1.3% from 2018-end level to $3 billion.
Capital Deployment
The company paid out $305 million in dividend and spent $200 million in share buybacks during the fourth quarter.
As of Dec 31, 2019, Nasdaq had $632 million remaining under its share repurchase authorization.
Dividend Update
The board of directors announced quarterly dividend of 47 cents per share.
Guidance
Nasdaq provided 2020 non-GAAP operating expense guidance in the range of $1.31 billion to $1.36 billion.
Non-GAAP tax rate is estimated to be in the range of 25.5% to 27.5% in 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
At this time, Nasdaq has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, 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 trending upward for the stock, and the magnitude of this revision looks promising. Notably, Nasdaq has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.