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Nasdaq (NDAQ) Q4 Earnings In Line, Revenues Beat Estimates

Nasdaq, Inc. NDAQ reported fourth-quarter 2018 adjusted earnings per share of $1.26, in line with the Zacks Consensus Estimate. The bottom line improved 21% year over year.

The company witnessed solid growth across all business segments as well as decline in expenses, which induced bottom-line improvement.

Performance in Detail

Nasdaq’s revenues of $645 million increased 2.4% year over year. The upside stemmed from 11% organic revenue growth, which was partially offset by a 7% reduction due to the net impact of the divestiture and acquisition of businesses, and a 2% reduction due to unfavorable changes in foreign exchange rates. The top line beat the Zacks Consensus Estimate of $630 million.

Adjusted operating expenses were $330 million in the reported quarter, down 3% from the year-ago period owing to the divestment of the Public Relations Solutions and Digital Media Services businesses and a $7-million favorable impact from changes in forex rates.

Nasdaq, Inc. Price, Consensus and EPS Surprise

Nasdaq, Inc. Price, Consensus and EPS Surprise | Nasdaq, Inc. Quote

Full-Year Highlights

Adjusted earnings per share of $4.86 surpassed the Zacks Consensus Estimate of $4.82. The bottom line also improved 20% year over year.

Revenues of $2.53 million increased 5% from 2017. It outpaced the Zacks Consensus Estimate of $2.51 billion.

The Nasdaq stock market witnessed 186 IPOs.

Segment Details

Net revenues at Market Services increased 12% from the year-ago quarter to $249 million. This upside was driven by improved revenues from equity derivatives and cash equity trading, partially offset by a lower fixed income and commodities trading plus clearing and trade management services.

Revenues at Corporate Services grew 2% year over year to $133 million, mainly on the back of a rise in Listings Services revenues, partially offset by lower Corporate Solutions revenues.

Information Services revenues rose 20% year over year to $187 million. Higher revenues at Market Data Products, Index revenues as well as Investment Data & Analytics revenues drove the upside.

Revenues at Market Technology increased 7% year over year to $76 million, riding on 8% organic growth, driven by increases in software delivery and support revenues and higher software as a service revenues.

Financial Update

Nasdaq had cash and cash equivalents of $545 million as of Dec 31, 2018, up 44.6% from 2017-end level. As of Dec 31, 2018, long-term debt reduced 8.9% from 2017-end level to $3.8 billion.

Capital Deployment

Nasdaq bought back shares worth $394 million and paid $280 million in dividends in 2018.

Business Update

Nasdaq has offered to buy Oslo Børs VPS Holding ASA at NOK 152 per share. The company intends to combine it with Nasdaq's leading Nordic markets.

The transaction is expected to achieve Nasdaq’s stated return on invested capital requirement of at least 10% within 3-5 years, and be accretive to non-GAAP earnings per share within 12 months of closing.


Nasdaq expects 2019 non-GAAP operating expense in the range of $1,325 to $1,375 million.

Non-GAAP tax rate is estimated to be in the range of 25% to 27% in 2019.

Our Take

Nasdaq’s solid results are encouraging. The company remains focused on expansion through organic initiatives and acquisitions, which open up cross-selling opportunities in new markets. It is increasing its focus on ramping up its foothold as a technology and analytics provider. The top line should also 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 From Finance Sector

Among other players from the finance sector, earnings of American Express Company AXP, The Progressive Corporation PGR and Principal Financial Group Inc. PFG missed the Zacks Consensus Estimate.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?

From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.

This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.

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