It has been about a month since the last earnings report for Nasdaq (NDAQ). Shares have added about 2.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Nasdaq due for a pullback? 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 drivers.
Nasdaq Q2 Earnings Top Estimates, Revenues Miss
Nasdaq 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.
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.
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.
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.
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.
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.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
At this time, Nasdaq has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions 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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