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Will Lower Trading Volume Mar MarketAxess (MKTX) Q2 Earnings?

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MarketAxess Holdings Inc. (MKTX - Free Report) is expected to witness a decline in earnings from the year-ago reported figure due to lower revenues when it reports second-quarter 2021 earnings results on Jul 21, 2021.

Zacks Consensus Estimate

The consensus estimate for June-quarter earnings of this operator of bond trading platforms is pegged at $1.67 per share, which indicates a decrease of 24.1% from the prior-year period’s reported number.

The consensus mark for revenues stands at $184.59 million, suggesting a 0.1% dip from the year-ago quarter’s reported figure.

Factors to Watch

MarketAxess already released total trading volume of $1.58 trillion for the second quarter, which declined 8.3% year over year and 17%, sequentially. This downside was due to muted bond trading. There was a ramp-down in overall credit market activity from last-year levels due to economic disturbance caused by the pandemic. Year-over-year bond trading declined in the categories of U.S. High-Grade, U.S. High-Yield, U.S. Government Bonds.

The company’s bond trading business thrives when credit spread volatility increases. Last year, credit spread volatility was greater than this year and credit spreads in high-grade were also wider. Credit spread widening means more riskiness  in the market, which is when bond looks more attractive. Last year, it also witnessed huge debt issuance by corporates. These factors led to a rise in bond trading, which in turn, aided volumes, revenues and earnings growth of the company.

MarketAxess earns commission and fees revenues on the bond trading executed on its platforms. Thus, weak trading volumes are expected to have weighed on commission and fees revenues, which constitute 90% of the company’s revenues.

Along with pressure on the top line, margins are likely to have been stressed by high expenses. The company expects total expenses for 2021 in the range of $370-$386, which have been revised upward from the previous projection of $362-$382 million.

Earnings Surprise History

The company’s earnings beat estimates in three of the last four quarters (missed the mark in one), the average surprise being 2.23%. This is depicted in the chart below:

MarketAxess Holdings Inc. Price and EPS Surprise

MarketAxess Holdings Inc. Price and EPS Surprise

MarketAxess Holdings Inc. price-eps-surprise | MarketAxess Holdings Inc. Quote

Here is what our quantitative model predicts:

Our proven model does not predict an earnings beat for MarketAxess this time around. The combination of a positive  Earnings ESP  and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is not the case here. You can uncover the best stocks to buy or sell before they are reported with our  Earnings ESP Filter.

Earnings ESP:  MarketAxess has an Earnings ESP of 0.00%.

Zacks Rank:  MarketAxess currently has a Zacks Rank #4 (Sell).

Stocks to Consider

Some stocks worth considering with the apt combination of elements to surpass estimates this reporting cycle are as follows:

Cboe Global Markets, Inc. (CBOE - Free Report) has an Earnings ESP of +1.34% and a Zack Rank #3, presently.You can see  the complete list of today’s Zacks #1 Rank stocks here.

Tradeweb Markets Inc. (TW - Free Report)   has an Earnings ESP of +1.76% and a Zacks Rank #2, presently.

Coinbase Global, Inc. (COIN - Free Report) has an Earnings ESP of +6.64% and a Zacks Rank of 1, presently.