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MarketAxess (MKTX) Q4 Earnings Miss on Soaring Costs, Down Y/Y

MarketAxess Holdings Inc. MKTX reported fourth-quarter 2021 earnings per share of $1.37, which missed the Zacks Consensus Estimate of $1.43. Also, the bottom line declined from $1.91 per share a year ago. The company’s weak fourth-quarter earnings were caused by escalating costs and decreased trading volumes from the total credit category.

Total revenues decreased to $165.1 million for the quarter under review from $171.3 million a year ago, primarily due to a decline in Commission sales figure. Nonetheless, the top line marginally beat the Zacks Consensus Estimate of $164 million due to higher post-trade services figures.

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

Emerging markets volume increased 15% year over year to $160.6 billion. For the fourth quarter, the company announced active total client firms of 1,877, while international client firms were recorded at 956.

Commission revenues of $145.9 million declined from $155.8 million in fourth-quarter 2020. Nevertheless, all other revenues comprising information services, post-trade services and other revenues climbed to $19.1 million from $15.5 million a year ago.

For the fourth quarter, the total credit category’s trading volumes decreased to $604.4 billion from $639.6 billion in the prior-year period, primarily due to year-over-year fall in total U.S. high-grade credit. Rates trading advanced to $1,206.1 billion from the year-ago figure of $826.3 billion.

Total expenses of $92.5 million increased from $79.6 million in the prior-year quarter, primarily due to a rise in costs related to employee compensation and benefits, technology and communications, and general and administrative.

Operating income slumped to $72.6 million for the quarter under review from $91.7 million in the December quarter of 2020. Operating margin of 44% declined 950 basis points year over year.

Cash Flow

Operating cash flow for the fourth quarter was $145.7 million, significantly down from $227.6 million a year ago. During the quarter, the company generated free cash flow of $72 million, which dipped from $95.3 million in the comparable period last year.

Shareholder Value Boost

MarketAxess’ board of directors announced a 6% hike in quarterly cash dividend to 70 cents per share, which will be paid out on Feb 23 to shareholders of record as of Feb 9.

In the fourth quarter, the company bought back 111,694 shares worth $45 million. Further, MKTX announced a new share buyback program of $150 million, which will commence from first-quarter 2022.

Balance Sheet (as of Dec 31, 2021)

The company exited the fourth quarter with total cash and cash equivalents of $506.7 million, which increased from $432.7 million at third quarter-end.

Total assets of $1,530.5 million declined sequentially from $1,611.9 million. Total stockholders’ equity was $1,041.3 million at fourth quarter-end, declining from $1,055.3 million in the prior quarter.


Expenses are projected in the range of $385-$415 million, whose mid-point indicates an increase from the 2021 level of $361.7 million. It expects capital expenditure for 2022 within $58-$62 million.

Zacks Rank & Key Picks

MarketAxess currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the Finance space include LendingClub Corp. LC, Houlihan Lokey, Inc. HLI and Alerus Financial Corp. ALRS. While LendingClub and Houlihan Lokey sport a Zacks Rank #1 (Strong Buy), Alerus Financial carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in San Francisco, CA, LendingClub is an Internet financial services provider. It offers an online lending marketplace platform to connect investors and borrowers. The peer-to-peer lending platform is expected to gain from the ongoing economic recovery. LendingClub’s 2021 earnings are expected to rise 107.2% year over year to 11 cents per share. LC beat earnings estimates thrice in the last four quarters and met once, with an average of 186%.

Houlihan Lokey — headquartered in Los Angeles, CA — provides multiple financial services to clients all over the world. Its growing footprint in Europe and Asia’s investment banking services field will help HLI boost strategic and shareholder value in the coming days. Rising average transaction fees will help HLI increase corporate finance revenues.

Houlihan Lokey’s bottom line for the current year is expected to rise 49.8% year over year to $6.92 per share. In the past 30 days, it has witnessed four upward estimate revisions and no downward movement. HLI beat earnings estimates in all the last four quarters, with an average of 39.5%.

Based in Grand Forks, ND, Alerus Financial provides numerous financial services to clients. Its financial strength is reflected by massive total assets of $3.2 billion at third quarter-end, which increased 5.4% for the first nine months of 2021.

Rising investment securities will likely keep boosting ALRS’ asset position in the coming quarters. Alerus Financial’s bottom line for 2021 is expected to jump 11.1% year over year to $2.80 per share. ALRS beat earnings estimates thrice in the last four quarters and missed once, with an average surprise of 23.6%.

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