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Will Nasdaq (NDAQ) Pull a Surprise this Earnings Season?

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Nasdaq, Inc. (NDAQ - Free Report) is set to report second-quarter 2016 results on Jul 27, before the market opens. Last quarter, the company posted a positive earnings surprise of 2.25%. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Nasdaq has likely witnessed growth in its operating income in the to-be-reported quarter on the back of its prudent business management. This, in turn, is likely to have improved operating leverage.

Further, the company has likely witnessed growth supported by the expansion of its non-transaction revenue base. Also, the company might have experienced growth in its non-trading segments, driven by improvements in technology solutions as well as in both listings and information services segments.

Moreover, we expect the company to report considerable growth in its market services segment in the second quarter. In addition, Nasdaq started the second quarter with 18 new Exchange Traded Products (ETP) listings, which should also bode well for the upcoming earnings.

However, the company is likely to face an increase in its total core operating expenses, which in turn might limit operating margin expansion.

Also, stiff competition and currency fluctuation are likely to weigh on Nasdaq’s performance.

With respect to surprise trend, the company delivered a positive earnings surprise in three of the last four quarters with an average beat of 2.08%.

NASDAQ INC Price and EPS Surprise

NASDAQ INC Price and EPS Surprise | NASDAQ INC Quote

Earnings Whispers

Our proven model does not conclusively show that Nasdaq is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Nasdaq has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 88 cents.

Zacks Rank: Nasdaq carries a Zacks Rank #3, which increases the predictive power of ESP. However, an Earnings ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies from the finance sector that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

The Allstate Corporation (ALL - Free Report) has an Earnings ESP of +1.89% and a Zacks Rank #3. The company is set to report second-quarter earnings on Aug 3.

Bats Global Markets has an Earnings ESP of +3.23% and a Zacks Rank #2. The company is slated to report second-quarter earnings on Aug 4.

Cigna Corp. (CI - Free Report) has an Earnings ESP of +1.67% and a Zacks Rank #3. The company is set to report second-quarter earnings on Aug 4.

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