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MarketAxess (MKTX) Q1 Earnings Miss Estimates by a Penny

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MarketAxess Holdings Inc.’s MKTX first-quarter 2021 earnings per share of $2.11 missed the Zacks Consensus Estimate by a cent but gained 8% year over year.

Year-over-year bottom-line growth came on the back of increased revenues.

MarketAxess Holdings Inc. Price, Consensus and EPS Surprise

MarketAxess Holdings Inc. Price, Consensus and EPS Surprise
MarketAxess Holdings Inc. Price, Consensus and EPS Surprise

MarketAxess Holdings Inc. price-consensus-eps-surprise-chart | MarketAxess Holdings Inc. Quote

Operational Update

Revenues of $195.5 million beat the Zacks Consensus Estimate by 0.8% and also rose 15.7% year over year. Commission revenues jumped 12.7% year over year to $175.8 million.

All other revenues comprising information services, post-trade services and other revenues improved 48.5% to $19.6 million.

Total expenses at MarketAxess were up 18.1% from the prior-year quarter to $92 million. This rise was due to escalated employee compensation and benefit cost; professional and consulting; self-clearing consulting fees; and depreciation and amortization.

Operating income of $103.5 million increased 13.6% year over year owing to strength in revenues, partly offset by elevated costs.

Operating margin of 52.9% was down 100 basis points year over year.

Financial Update (as of Mar 31, 2021)

Total assets of $1.5 billion were up 16.1% from the level as of Dec 31, 2020.

Total cash, cash equivalents and investments were $390.9 million, down 15.2% from the level at 2020 end.

During the quarter, the company generated free cash flow of $52.3 million, down 1% year over year.

Dividend Update

The company announced a cash dividend of 66 cents per share to be paid out on May 26, 2021 to its stockholders of record as of the close of business on May 12, 2021.

Share Repurchases

A total of 1,050 shares were bought back at a cost of $0.5 million. In January 2021, the board of directors authorized a new buyback program for up to $100 million. The company expects repurchases under the new program to commence in April 2021 following the expiration of the current plan.

Guidance Update for 2021

Expenses are expected in the range of $370-$386 million compared with the previous estimate $362-$382 million. This increase in estimate is due to the impact of MuniBrokers LLC acquisition, which closed on Apr 9, 2021.

Our Take

MarketAxess has been growing its U.S credit market share by virtue of its Open Trading platform. Its solid growth in core products, superior financial model, large and increasing addressable market, significant operating leverage and an expanded suite of electronic trading protocols poise it well for the long haul.

Year to date, the stock has lost 8.3% against its industry’s growth of 13.3%.

However, other securities exchange companies in the same space, such as Intercontinental Exchange Inc. ICE, CME Group Inc. CME and Nasdaq, Inc. NDAQ have gained 3.7%, 13.7% and 20%, respectively, during the same time frame.

MarketAxess carries a Zacks Rank #3 (Hold), presently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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