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MarketAxess (MKTX) Up 10.8% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for MarketAxess (MKTX - Free Report) . Shares have added about 10.8% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
MarketAxess Q3 Earnings Top on Credit Trading Volume
MarketAxess reported third-quarter 2022 earnings per share of $1.58, beating the Zacks Consensus Estimate by 6%. The bottom line improved nearly 4% year over year.
Total revenues of $172.1 million rose 6% year over year in the quarter under review but fell short of the consensus mark by a whisker.
Solid growth in trading volumes across all product categories of MarketAxess, ranging from U.S. high-grade to other credit and rates products, fetched higher commission revenues that contributed to the quarterly results. However, escalating operating costs partially offset the upside.
Quarterly Operational Update
Active clients of MarketAxess totaled 1,972 in the third quarter, which increased 7% year over year. Active international clients attained a record figure of 993 in the quarter under review. The figure advanced 6% year over year.
Commission revenues of $153.2 million climbed 7.2% year over year. All other revenues comprising information services, post-trade services and other dipped 1.7% year over year to $18.9 million.
MarketAxess’ U.S. high-grade trading volume came in at $327.9 billion, which grew 18% year over year in the third quarter. Rising by the same year-over-year percentage as that of the trading volume, average daily volume (ADV) of the same product category came in at $5.1 billion. The figure fell short of the Zacks Consensus Estimate of $5.2 billion.
Other credit trading volume of $24.2 billion increased more than four-fold year over year. ADV of the same product also increased more than four-fold year over year in the quarter under review.
The emerging markets' trading volume and ADV improved 7.7% each on a year-over-year basis. The rates trading volume and ADV surged 40.9%, respectively, year over year in the quarter under review.
Total expenses increased 8.8% year over year to $95.8 million, mainly due to elevated employee compensation and benefits, and technology and communication expenses.
Operating income of $76 million advanced 3% year over year in the third quarter.
Balance Sheet (as of Sep 30, 2022)
MarketAxess exited the third quarter with cash, cash equivalents and investments of $352 million, which plunged 35.2% from the 2021-end level.
Total assets of $1.6 billion increased 1.9% from the figure as of Dec 31, 2021.
Total stockholders’ equity of $1 billion slipped 2.2% from the level at 2021 end.
Cash Flows
MarketAxess generated cash from operations of $85.1 million in the third quarter, which surged 35.5% year over year.
Free cash flows were recorded at nearly $70 million, tumbling 33.4% year over year.
Dividend Update
Management approved a quarterly cash dividend of 70 cents per share, which will be paid out on Nov 16, 2022, to shareholders of record as of Nov 2.
2022 Guidance
Management altered the 2022 outlook for expenses, considering the progression of operating expenses and the effect of foreign currency volatilities on a year-to-date basis. Simultaneously, the guidance for capital expenditures was also updated, while the same for the effective tax rate was flat.
Expenses for the year are now predicted within $390-$398 million compared with the prior outlook of $385-$415 million. The midpoint of the adjusted forecast indicates an increase of 9% from the 2021 level.
Capital expenditures are expected between $48 million and $52 million, down from the earlier guidance of $58-$62 million.
The effective tax rate is likely to stay at the upper end of the earlier-projected 24-26.0% range.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, MarketAxess has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
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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MarketAxess (MKTX) Up 10.8% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for MarketAxess (MKTX - Free Report) . Shares have added about 10.8% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
MarketAxess Q3 Earnings Top on Credit Trading Volume
MarketAxess reported third-quarter 2022 earnings per share of $1.58, beating the Zacks Consensus Estimate by 6%. The bottom line improved nearly 4% year over year.
Total revenues of $172.1 million rose 6% year over year in the quarter under review but fell short of the consensus mark by a whisker.
Solid growth in trading volumes across all product categories of MarketAxess, ranging from U.S. high-grade to other credit and rates products, fetched higher commission revenues that contributed to the quarterly results. However, escalating operating costs partially offset the upside.
Quarterly Operational Update
Active clients of MarketAxess totaled 1,972 in the third quarter, which increased 7% year over year. Active international clients attained a record figure of 993 in the quarter under review. The figure advanced 6% year over year.
Commission revenues of $153.2 million climbed 7.2% year over year. All other revenues comprising information services, post-trade services and other dipped 1.7% year over year to $18.9 million.
MarketAxess’ U.S. high-grade trading volume came in at $327.9 billion, which grew 18% year over year in the third quarter. Rising by the same year-over-year percentage as that of the trading volume, average daily volume (ADV) of the same product category came in at $5.1 billion. The figure fell short of the Zacks Consensus Estimate of $5.2 billion.
Other credit trading volume of $24.2 billion increased more than four-fold year over year. ADV of the same product also increased more than four-fold year over year in the quarter under review.
The emerging markets' trading volume and ADV improved 7.7% each on a year-over-year basis. The rates trading volume and ADV surged 40.9%, respectively, year over year in the quarter under review.
Total expenses increased 8.8% year over year to $95.8 million, mainly due to elevated employee compensation and benefits, and technology and communication expenses.
Operating income of $76 million advanced 3% year over year in the third quarter.
Balance Sheet (as of Sep 30, 2022)
MarketAxess exited the third quarter with cash, cash equivalents and investments of $352 million, which plunged 35.2% from the 2021-end level.
Total assets of $1.6 billion increased 1.9% from the figure as of Dec 31, 2021.
Total stockholders’ equity of $1 billion slipped 2.2% from the level at 2021 end.
Cash Flows
MarketAxess generated cash from operations of $85.1 million in the third quarter, which surged 35.5% year over year.
Free cash flows were recorded at nearly $70 million, tumbling 33.4% year over year.
Dividend Update
Management approved a quarterly cash dividend of 70 cents per share, which will be paid out on Nov 16, 2022, to shareholders of record as of Nov 2.
2022 Guidance
Management altered the 2022 outlook for expenses, considering the progression of operating expenses and the effect of foreign currency volatilities on a year-to-date basis. Simultaneously, the guidance for capital expenditures was also updated, while the same for the effective tax rate was flat.
Expenses for the year are now predicted within $390-$398 million compared with the prior outlook of $385-$415 million. The midpoint of the adjusted forecast indicates an increase of 9% from the 2021 level.
Capital expenditures are expected between $48 million and $52 million, down from the earlier guidance of $58-$62 million.
The effective tax rate is likely to stay at the upper end of the earlier-projected 24-26.0% range.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, MarketAxess has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
MarketAxess has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.