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Why Is Nasdaq (NDAQ) Up 2.3% Since Last Earnings Report?

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A month has gone by since the last earnings report for Nasdaq (NDAQ - Free Report) . Shares have added about 2.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Nasdaq due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Nasdaq Beats on Q1 Earnings & Revenues, Ups Dividend

Nasdaq reported first-quarter 2021 adjusted earnings per share of $1.96, beating the Zacks Consensus Estimate of $1.74 by 12.6%. The bottom line increased 31% year over year.

The improvement was primarily driven by organic growth, favorable changes in foreign exchange rates, margin expansion and solid segmental performance.

Performance in Detail

Nasdaq’s revenues of $851 million increased 21% year over year. The upside was primarily attributable to a $118 million positive impact from organic growth, an $18 million impact of favorable changes in foreign exchange rates and a $14 million increase from the inclusion of revenues from acquisitions. The top line beat the Zacks Consensus Estimate by 2.8%.

Adjusted operating expenses were $393 million, up 17% from the year-ago period owing to a $24 million organic increase, an $18 million increase from acquisitions and a $15 million increase from changes in FX rates.

Operating margin of 54% expanded 200 basis points year over year.

Nasdaq  witnessed 275 IPOs in the first quarter, representing $74 billion in capital raised, including 79 operating company IPOs as well as 196 IPOs from special purpose acquisition companies. In the reported quarter, the Nasdaq welcomed 319 new listings.

Segment Details

Net revenues at Market Services were up 20% from the year-ago quarter to $338 million. This upside was largely due to higher revenues from equity derivative trading and clearing, cash equity trading, fixed income and commodities trading and clearing, and trade management services.

Revenues at Corporate Services increased 21% year over year to $155 million, driven by higher listings services revenues as well as IR & ESG revenues.

Investment Intelligence revenues rose 22% year over year to $258 million. Higher market data, index and analytics revenues drove the upside.

Revenues at Market Technology increased 23% year over year to $100 million, largely due to higher revenues at marketplace infrastructure technology as well as anti-financial crime technology.

Financial Update

Nasdaq had cash and cash equivalents of $774 million as of Mar 31, 2021, down more than three-fold from 2020-end level. Long-term debt decreased 1.6% from 2019-end level to $5.5 billion as of Mar 31, 2021.

Capital Deployment

Nasdaq returned $243 million in the first quarter of 2021, including $162 million in share repurchases.

As of Mar 31, 2021, Nasdaq had $248 million remaining under its share repurchase authorization.

Dividend Update

The board of directors approved a 10% increase in quarterly dividend to 54 cents per share. The dividend is payable on Jun 25, 2021 to shareholders of record as of Jun 11, 2021.

Guidance

Nasdaq provided 2021 non-GAAP operating expense guidance in the range of $1.5 billion to $1.62 billion, revised from $1.55 billion to $1.62 billion guided earlier.

Non-GAAP tax rate is still estimated to be in the range of 25% to 27% in 2021.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Nasdaq has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, 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

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Nasdaq has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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