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MarketAxess Holdings Inc.’s (MKTX - Free Report) fourth-quarter 2020 earnings per share of $1.91 beat the Zacks Consensus Estimate by 3.8% and also improved 44.7% year over year.
Better-than-expected results came on the back of high corporate bond trading volumes.
MarketAxess Holdings Inc. Price, Consensus and EPS Surprise
Revenues of $171.3 million beat the Zacks Consensus Estimate by 1.5% and also rose 32% year over year. Commission revenues jumped 33% year over year to $155.8 million.
All other revenues comprising information services, post-trade services and other revenues improved 22.5% to $15.53 million. Total trading volumes expanded 30.7% year over year to $639.6 billion, driven by an increase in U.S. high grade and other credit trading volumes.
Total expenses at MarketAxess were up 15.6% from the prior-year quarter to $79.6 million. This rise was due to escalated employee compensation and benefit cost; professional and consulting, technology and communication costs; clearing costs; and depreciation and amortization. Operating income of $91.7 million increased 50.7% year over year owing to strength in revenues, partly offset by elevated costs.
Operating margin of 53.5% grew 660 basis points year over year.
Financial Update
Total assets were $1.3 billion as of Dec 31, 2020, up 39.4% from the level as of Dec 31, 2019.
Total cash, cash equivalents and investments as of Dec 31, 2020 were $489 million, down 2.2% from the level at 2019 end. During the quarter, the company generated free cash flow of $95.3 million, up 31.3% year over year.
2020 Update
Total revenues for the year ended Dec 31, 2020 increased 34.8% to $689.1 million. Earnings per share of $7.85 were up 45.4% year over year.
Dividend Update
The company declared a 10% increase in the quarterly cash dividend to 66 cents per share to be paid out on Feb 24, 2021 to its stockholders of record as of the close of business on Feb 10, 2021.
Share Repurchases
A total of 1,400 shares were repurchased in the fourth quarter of 2020 at a cost of $0.7 million. In January 2021, the board of directors authorized a new buyback program for up to $100 million. The company expects repurchases under the new program to commence in April 2021 following the expiration of the current program.
Guidance for 2021
Expenses are expected in the range of $362- and $382 million and includes a full year of Regulatory Reporting Services expenses estimated between $15 million and $18 million.
Capital expenditures are expected in the band of $50-$55 million. The same includes an expected increase in capitalized software development to support new protocols, products and platform enhancements.
Overall effective tax rate is expected between 22% and 24% and reflects a lower benefit from estimated excess tax benefits on share-based compensation awards.
Our Take
The company’s strong volumes in the fourth quarter of 2020 reflect its accelerating market share gains, robust credit market volumes and a global shift among dealers and investors toward fixed income trading automation. MarketAxess has been growing its share of U.S credit market by virtue of its Open Trading platform. Its solid growth in core products, superior financial model, large and increasing addressable market, significant operating leverage and an expanded suite of electronic trading protocols poise it well for the long haul.
In three months’ time, the stock has lost 8.5% against its industry ’s growth of 16.5%. However, other securities exchange companies in the same space, such as Intercontinental Exchange Inc. (ICE - Free Report) , CME Group Inc. (CME - Free Report) and Nasdaq, Inc. (NDAQ - Free Report) have gained 20.1%, 22.8% and 15.9%, respectively, during the same time frame.
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
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MarketAxess (MKTX) Q4 Earnings & Revenues Surpass Estimate
MarketAxess Holdings Inc.’s (MKTX - Free Report) fourth-quarter 2020 earnings per share of $1.91 beat the Zacks Consensus Estimate by 3.8% and also improved 44.7% year over year.
Better-than-expected results came on the back of high corporate bond trading volumes.
MarketAxess Holdings Inc. Price, Consensus and EPS Surprise
MarketAxess Holdings Inc. price-consensus-eps-surprise-chart | MarketAxess Holdings Inc. Quote
Operational Update
Revenues of $171.3 million beat the Zacks Consensus Estimate by 1.5% and also rose 32% year over year. Commission revenues jumped 33% year over year to $155.8 million.
All other revenues comprising information services, post-trade services and other revenues improved 22.5% to $15.53 million.
Total trading volumes expanded 30.7% year over year to $639.6 billion, driven by an increase in U.S. high grade and other credit trading volumes.
Total expenses at MarketAxess were up 15.6% from the prior-year quarter to $79.6 million. This rise was due to escalated employee compensation and benefit cost; professional and consulting, technology and communication costs; clearing costs; and depreciation and amortization.
Operating income of $91.7 million increased 50.7% year over year owing to strength in revenues, partly offset by elevated costs.
Operating margin of 53.5% grew 660 basis points year over year.
Financial Update
Total assets were $1.3 billion as of Dec 31, 2020, up 39.4% from the level as of Dec 31, 2019.
Total cash, cash equivalents and investments as of Dec 31, 2020 were $489 million, down 2.2% from the level at 2019 end.
During the quarter, the company generated free cash flow of $95.3 million, up 31.3% year over year.
2020 Update
Total revenues for the year ended Dec 31, 2020 increased 34.8% to $689.1 million. Earnings per share of $7.85 were up 45.4% year over year.
Dividend Update
The company declared a 10% increase in the quarterly cash dividend to 66 cents per share to be paid out on Feb 24, 2021 to its stockholders of record as of the close of business on Feb 10, 2021.
Share Repurchases
A total of 1,400 shares were repurchased in the fourth quarter of 2020 at a cost of $0.7 million. In January 2021, the board of directors authorized a new buyback program for up to $100 million. The company expects repurchases under the new program to commence in April 2021 following the expiration of the current program.
Guidance for 2021
Expenses are expected in the range of $362- and $382 million and includes a full year of Regulatory Reporting Services expenses estimated between $15 million and $18 million.
Capital expenditures are expected in the band of $50-$55 million. The same includes an expected increase in capitalized software development to support new protocols, products and platform enhancements.
Overall effective tax rate is expected between 22% and 24% and reflects a lower benefit from estimated excess tax benefits on share-based compensation awards.
Our Take
The company’s strong volumes in the fourth quarter of 2020 reflect its accelerating market share gains, robust credit market volumes and a global shift among dealers and investors toward fixed income trading automation. MarketAxess has been growing its share of U.S credit market by virtue of its Open Trading platform. Its solid growth in core products, superior financial model, large and increasing addressable market, significant operating leverage and an expanded suite of electronic trading protocols poise it well for the long haul.
In three months’ time, the stock has lost 8.5% against its industry ’s growth of 16.5%. However, other securities exchange companies in the same space, such as Intercontinental Exchange Inc. (ICE - Free Report) , CME Group Inc. (CME - Free Report) and Nasdaq, Inc. (NDAQ - Free Report) have gained 20.1%, 22.8% and 15.9%, respectively, during the same time frame.
MarketAxess carries a Zacks Rank #3 (Hold), presently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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