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Why Is Nasdaq (NDAQ) Up 2% Since the Last Earnings Report?

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It has been about a month since the last earnings report for Nasdaq, Inc. (NDAQ - Free Report) . Shares have added about 2% in that time frame, underperforming the market.

Will the recent positive trend continue leading up to the stock’s next earnings release, or is it 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.

Nasdaq Q4 Adjusted Earnings Beat, Revenue Up Y/Y

Nasdaq reported fourth-quarter 2016 adjusted earnings per share of $0.95 per share, beating the Zacks Consensus Estimate by $0.01. Also, the bottom line improved 7% year over year.

Results were driven by higher revenues, with growth across all segments. However, on the downside, the quarter experienced higher expenses.

Adjusted net income for fourth-quarter 2016 came in at $161 million, up 7.3% year over year.

On a GAAP basis, the company reported net loss of $224 million or a loss of $1.35 per share, compared with net income of $148 million or $0.88 per share, in the prior-year quarter.

Performance in Detail

Nasdaq’s revenues of $599 million for the reported quarter increased 12% year over year. The Zacks Consensus Estimate was $599.8 million. The increase was driven by a $54-million positive impact from acquisitions.

Adjusted operating expenses were $324 million, up 13.7% year over year. This rise mainly reflects $29 million of incremental operating expenses from the acquisitions closed in 2016. Notably, the company expects 2017 non-GAAP operating expense in the range of $1.26–$1.31 billion.

Nasdaq realigned its reporting segments to combine Listing Services and Corporate Solutions into a new 'Corporate Services' segment, while Market Technology is now a separate segment. Also the company combined its U.S. and European fixed income products and services under a single brand called Nasdaq Fixed Income.

Segment wise, net revenues at Market Services jumped 12.8% from the year-ago quarter to $220 million. The rise was driven by higher revenues from the ISE and Nasdaq CXC acquisitions, partially offset by lower market share in the U.S. equity derivatives and U.S. cash equities businesses.

Revenues at Corporate Services climbed 16.8% year over year to $167 million. The increase mainly reflects inclusion of revenues from the Marketwired and Boardvantage acquisitions in the Corporate Solutions business as well as higher revenues from listing services.

Information Services’ revenues rose 6.3% year over year to $135 million. Higher proprietary data products revenues and the inclusion of revenues from the acquisitions of ISE and Nasdaq CXC led to increased data products revenues. Additionally, revenues from index licensing and services increased from the prior-year quarter.

Revenues at Market Technology increased 8.5% year over year to $77 million, reflecting organic revenue growth.

During 2016, Market Technology order intake totaled $276 million. This includes $136 million in fourth-quarter 2016. The Nasdaq Stock Market witnessed 283 new listings during the year, including 91 IPOs.

As of Dec 31, 2016, Nasdaq achieved $38 million in annualized run-rate cost synergies for the acquisitions in 2016 out of the targeted $60 million.

Nasdaq had cash and cash equivalents of $403 million as of Dec 31, 2016. Net debt increased 55.1% over the 2015-end level to $3.2 billion.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been three downward revisions for the current quarter compared to two upward.

Nasdaq, Inc. Price and Consensus

 

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

VGM Scores

At this time, Nasdaq's stock has a poor Growth Score of 'C', though it is lagging a lot on the momentum front with an 'F'. 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 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate stock is suitable solely for growth investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.


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