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Nasdaq (NDAQ) Q2 Earnings Top Estimates, Revenues Miss

Zacks Equity Research

Nasdaq, Inc. NDAQ reported second-quarter 2019 adjusted earnings per share of $1.22, beating the Zacks Consensus Estimate of $1.19 by 2.5%. The bottom line increased 3.4% year over year.

The company witnessed growth in non-trading revenues and decline in expenses. Strategic acquisitions contributed to revenues in the quarter.

Performance in Detail

Nasdaq’s revenues of $623 million increased 1.3% year over year. The upside was primarily attributable to inclusion of revenues from Cinnober and Quandl acquisitions, partially offset by negative impact of divestitures and unfavorable forex. Organic revenues grew 4%. The top line however missed the Zacks Consensus Estimate of $632 million.

Adjusted operating expenses were $322 million in the reported quarter, down 1% from the year-ago period owing to net impact of acquisitions and divestitures and favorable impact of changes in forex rates, partially offset by organic expense increase.

Operating margin of 48% expanded 100 basis points year over year.

In the U.S. market, Nasdaq welcomed 81 new listings, including 60 IPOs. Nasdaq's Nordic, and Baltic exchanges and Nasdaq First North added 19 new listings, including 14 IPOs.

Nasdaq, Inc. Price, Consensus and EPS Surprise

Nasdaq, Inc. Price, Consensus and EPS Surprise

Nasdaq, Inc. price-consensus-eps-surprise-chart | Nasdaq, Inc. Quote

Segment Details

Net revenues at Market Services were down 4% from the year-ago quarter to $227 million. This downside was due to lower revenues from cash equity trading and fixed income and commodities trading.

Revenues at Corporate Services increased 3% year over year to $123 million, driven by higher listings services revenues as well as corporate solutions revenues.

Information Services revenues rose 11% year over year to $194 million. Higher market data revenue, index revenues as well as investment data & analytics revenues drove the upside.

Revenues at Market Technology increased 20% year over year to $79 million, largely riding on Cinnober acquisition.

Financial Update

Nasdaq had cash and cash equivalents of $363 million as of Jun 30, 2019, down 38.1% from 2018-end level. As of Jun 30, 2019, long-term debt increased 2.2% from 2018-end level to $3 billion.

Capital Deployment

The company paid $77 million in dividend and spent $50 million in share buybacks during the second quarter.

As of Jun 30, 2019, Nasdaq had $282 million remaining under its share repurchase authorization.

Guidance

Nasdaq expects 2019 non-GAAP operating expense in the range of $1.295 billion to $1.320 billion, revised from $1.290 billion to $1.330 billion guided earlier.

Non-GAAP tax rate is estimated to be in the range of 26% to 27% in 2019.

Dividend Update

The board of directors announced quarterly dividend of 47 cents per share. The dividend will be paid out on Sep 27, 2019 to shareholders of record as of Sep 13, 2019.

Our Take

Nasdaq came up with decent second-quarter 2019 results as it witnessed growth in non-trading revenues and decline in expenses. The company remains focused on expansion through organic initiatives and acquisitions, which open up cross-selling opportunities in new markets. It is increasing focus on ramping up its foothold as a technology and analytics provider. Going forward, its top line is expected to benefit from the company’s consistent focus on growing non-transaction revenue base including technology, listing and information revenues.

Zacks Rank

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

Performance of Other Companies in the Finance Sector

Of the companies from the finance sector that have reported second-quarter results so far, The Progressive Corporation PGR, American Express Company AXP and Discover Financial Services DFS beat the respective Zacks Consensus Estimate for earnings.

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