We expect securities exchange Nasdaq OMX Group Inc. (NDAQ - Analyst Report) to beat expectations when it reports fourth quarter 2012 results on Jan 31, 2013.
Why a Likely Positive Surprise?
Our proven model shows that Nasdaq is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Nasdaq currently has an Earnings ESP (Read: Zacks Earnings ESP: A Better Method) of 1.64% as the Most Accurate Estimate is at 62 cents and the Zacks Consensus Estimate is at 61 cents.
Zacks Rank #3 (Hold): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of Nasdaq’s Zacks Rank # 3 (Hold) and +1.64% ESP makes us expect a positive earnings beat on Jan 31.
What is Driving the Better Than Expected Earnings?
NASDAQ’s cost reduction plan is expected to generate significant cost savings in 2012. Further, the recent acquisitions and proactive OTC market expansion initiatives are expected to boost sales, leading to a positive earnings surprise in the upcoming quarter.
A positive trend is seen in the trailing four-quarter average surprise of 2.12%, which was greatly helped by the 6.67% and 3.33% surprise in the second and third quarters of 2012. This was possible because Nasdaq did a good job of controlling expenses. Improved revenues in the Issuer Services and Market Technology segments also helped.
Other Stocks to Consider
Nasdaq is not the only company looking up this earnings season. We also see likely earnings beats coming from these industry peers:
CBOE Holdings, Inc. (CBOE - Analyst Report), Earnings ESP of +2.38% and Zacks Rank #2 (Buy)
MarketAxess Holdings Inc. (MKTX - Analyst Report), Earnings ESP of +2.86% and Zacks Rank #3 (Hold)