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Why Is MarketAxess (MKTX) Up 0.7% Since Last Earnings Report?
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A month has gone by since the last earnings report for MarketAxess (MKTX - Free Report) . Shares have added about 0.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is MarketAxess 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.
MarketAxess Q2 Earnings Beat on Higher Trading Volumes
MarketAxess Holdings Inc. reported second-quarter 2022 earnings per share of $1.78, which outpaced the Zacks Consensus Estimate by 4.1%. The bottom line improved 1% year over year.
Total revenues of $182 million increased 3% year over year in the second quarter but fell short of the consensus mark by 1.2%.
MKTX’s quarterly results gained momentum on the back of robust growth in trading volumes across all product categories, broad-based market share gains and impressive strength exhibited by its new products of U.S. Treasuries and municipal bonds. However, the second-quarter performance was partly offset by an elevated expense level.
Quarterly Operational Update
In the second quarter, MarketAxess’ active clients totaled 1,935, which improved 5% year over year. Meanwhile, international client firms totaled 982, up 6% year over year.
Commission revenues grew 4.5% year over year to $163.5 million in the quarter under review. All other revenues, comprising information services, post-trade services and other revenues, declined 5.5% year over year to $18.8 million.
U.S. high-grade trading volume of MarketAxess increased 11% year over year in the second quarter, while the average daily volume (ADV) of the same product category rose 13% year over year. Total other credit trading volume improved 15.8% year over year, while ADV of the same climbed 17% year over year.
Emerging markets' trading volume rose 11.5% year over year while its ADV climbed 13% year over year. The rates trading volume and ADV surged 61.2% and 64%, respectively, year over year in the quarter under review.
Total expenses of $97.4 million escalated 9% year over year primarily due to a rise in employee compensation and benefits coupled with increased technology and communication expenses.
Operating income declined 3% year over year to $85 million in the second quarter. Operating margin deteriorated 291 basis points year over year to 47%.
Balance Sheet (as of Jun 30, 2022)
MarketAxess exited the second quarter with cash, cash equivalents and investments of $324.8 million. The same stood at $542.8 million at the end of December 2021.
Total assets increased 2.4% from the 2021-end level to $1.6 billion.
Total stockholders’ equity of $1 billion declined 3.9% from the level as of Dec 31, 2021.
Cash Flows
During the second quarter, MarketAxess generated cash from operations of $93.6 million, which slid 3.2% year over year.
Free cash flows amounted to $62.8 million in the quarter, down 6.6% year over year.
Capital Deployment Update
MarketAxess bought back shares worth $48.7 million in the second quarter.
Management unveiled a quarterly cash dividend of 70 cents per share, which will be paid out on Aug 17, 2022, to shareholders of record as of Aug 3.
2022 Guidance Reiterated
Management maintained its guidance for operating expenses in the range of $385 million to $415 million this year. Capital expenditures are anticipated within $58-$62 million.
The effective tax rate for 2022 is expected to stay at the upper-end of the previously guided 24-26% range.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -8.25% due to these changes.
VGM Scores
At this time, MarketAxess has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, MarketAxess has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is MarketAxess (MKTX) Up 0.7% Since Last Earnings Report?
A month has gone by since the last earnings report for MarketAxess (MKTX - Free Report) . Shares have added about 0.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is MarketAxess 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.
MarketAxess Q2 Earnings Beat on Higher Trading Volumes
MarketAxess Holdings Inc. reported second-quarter 2022 earnings per share of $1.78, which outpaced the Zacks Consensus Estimate by 4.1%. The bottom line improved 1% year over year.
Total revenues of $182 million increased 3% year over year in the second quarter but fell short of the consensus mark by 1.2%.
MKTX’s quarterly results gained momentum on the back of robust growth in trading volumes across all product categories, broad-based market share gains and impressive strength exhibited by its new products of U.S. Treasuries and municipal bonds. However, the second-quarter performance was partly offset by an elevated expense level.
Quarterly Operational Update
In the second quarter, MarketAxess’ active clients totaled 1,935, which improved 5% year over year. Meanwhile, international client firms totaled 982, up 6% year over year.
Commission revenues grew 4.5% year over year to $163.5 million in the quarter under review. All other revenues, comprising information services, post-trade services and other revenues, declined 5.5% year over year to $18.8 million.
U.S. high-grade trading volume of MarketAxess increased 11% year over year in the second quarter, while the average daily volume (ADV) of the same product category rose 13% year over year. Total other credit trading volume improved 15.8% year over year, while ADV of the same climbed 17% year over year.
Emerging markets' trading volume rose 11.5% year over year while its ADV climbed 13% year over year. The rates trading volume and ADV surged 61.2% and 64%, respectively, year over year in the quarter under review.
Total expenses of $97.4 million escalated 9% year over year primarily due to a rise in employee compensation and benefits coupled with increased technology and communication expenses.
Operating income declined 3% year over year to $85 million in the second quarter. Operating margin deteriorated 291 basis points year over year to 47%.
Balance Sheet (as of Jun 30, 2022)
MarketAxess exited the second quarter with cash, cash equivalents and investments of $324.8 million. The same stood at $542.8 million at the end of December 2021.
Total assets increased 2.4% from the 2021-end level to $1.6 billion.
Total stockholders’ equity of $1 billion declined 3.9% from the level as of Dec 31, 2021.
Cash Flows
During the second quarter, MarketAxess generated cash from operations of $93.6 million, which slid 3.2% year over year.
Free cash flows amounted to $62.8 million in the quarter, down 6.6% year over year.
Capital Deployment Update
MarketAxess bought back shares worth $48.7 million in the second quarter.
Management unveiled a quarterly cash dividend of 70 cents per share, which will be paid out on Aug 17, 2022, to shareholders of record as of Aug 3.
2022 Guidance Reiterated
Management maintained its guidance for operating expenses in the range of $385 million to $415 million this year. Capital expenditures are anticipated within $58-$62 million.
The effective tax rate for 2022 is expected to stay at the upper-end of the previously guided 24-26% range.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -8.25% due to these changes.
VGM Scores
At this time, MarketAxess has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, MarketAxess has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.