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Why Is MarketAxess (MKTX) Up 14.2% Since Last Earnings Report?
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A month has gone by since the last earnings report for MarketAxess (MKTX - Free Report) . Shares have added about 14.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is MarketAxess 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.
MarketAxess Q4 Earnings Miss on Soaring Costs, Down Y/Y
MarketAxess Holdings reported fourth-quarter 2021 earnings per share of $1.37, which missed the Zacks Consensus Estimate of $1.43. Also, the bottom line declined from $1.91 per share a year ago. The company’s weak fourth-quarter earnings were caused by escalating costs and decreased trading volumes from the total credit category.
Total revenues decreased to $165.1 million for the quarter under review from $171.3 million a year ago, primarily due to a decline in Commission sales figure. Nonetheless, the top line marginally beat the Zacks Consensus Estimate of $164 million due to higher post-trade services figures.
Operational Update
Emerging markets volume increased 15% year over year to $160.6 billion. For the fourth quarter, the company announced active total client firms of 1,877, while international client firms were recorded at 956.
Commission revenues of $145.9 million declined from $155.8 million in fourth-quarter 2020. Nevertheless, all other revenues comprising information services, post-trade services and other revenues climbed to $19.1 million from $15.5 million a year ago.
For the fourth quarter, the total credit category’s trading volumes decreased to $604.4 billion from $639.6 billion in the prior-year period, primarily due to year-over-year fall in total U.S. high-grade credit. Rates trading advanced to $1,206.1 billion from the year-ago figure of $826.3 billion.
Total expenses of $92.5 million increased from $79.6 million in the prior-year quarter, primarily due to a rise in costs related to employee compensation and benefits, technology and communications, and general and administrative.
Operating income slumped to $72.6 million for the quarter under review from $91.7 million in the December quarter of 2020. Operating margin of 44% declined 950 basis points year over year.
Balance Sheet (as of Dec 31, 2021)
The company exited the fourth quarter with total cash and cash equivalents of $506.7 million, which increased from $432.7 million at third quarter-end.
Total assets of $1,530.5 million declined sequentially from $1,611.9 million. Total stockholders’ equity was $1,041.3 million at fourth quarter-end, declining from $1,055.3 million in the prior quarter.
Cash Flow
Operating cash flow for the fourth quarter was $145.7 million, significantly down from $227.6 million a year ago. During the quarter, the company generated free cash flow of $72 million, which dipped from $95.3 million in the comparable period last year.
Shareholder Value Boost
MarketAxess’ board of directors announced a 6% hike in quarterly cash dividend to 70 cents per share, which will be paid out on Feb 23 to shareholders of record as of Feb 9.
In the fourth quarter, the company bought back 111,694 shares worth $45 million. Further, MKTX announced a new share buyback program of $150 million, which will commence from first-quarter 2022.
Guidance
Expenses are projected in the range of $385-$415 million, whose mid-point indicates an increase from the 2021 level of $361.7 million. It expects capital expenditure for 2022 within $58-$62 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -12.29% due to these changes.
VGM Scores
Currently, MarketAxess has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise MarketAxess has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Why Is MarketAxess (MKTX) Up 14.2% Since Last Earnings Report?
A month has gone by since the last earnings report for MarketAxess (MKTX - Free Report) . Shares have added about 14.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is MarketAxess 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.
MarketAxess Q4 Earnings Miss on Soaring Costs, Down Y/Y
MarketAxess Holdings reported fourth-quarter 2021 earnings per share of $1.37, which missed the Zacks Consensus Estimate of $1.43. Also, the bottom line declined from $1.91 per share a year ago. The company’s weak fourth-quarter earnings were caused by escalating costs and decreased trading volumes from the total credit category.
Total revenues decreased to $165.1 million for the quarter under review from $171.3 million a year ago, primarily due to a decline in Commission sales figure. Nonetheless, the top line marginally beat the Zacks Consensus Estimate of $164 million due to higher post-trade services figures.
Operational Update
Emerging markets volume increased 15% year over year to $160.6 billion. For the fourth quarter, the company announced active total client firms of 1,877, while international client firms were recorded at 956.
Commission revenues of $145.9 million declined from $155.8 million in fourth-quarter 2020. Nevertheless, all other revenues comprising information services, post-trade services and other revenues climbed to $19.1 million from $15.5 million a year ago.
For the fourth quarter, the total credit category’s trading volumes decreased to $604.4 billion from $639.6 billion in the prior-year period, primarily due to year-over-year fall in total U.S. high-grade credit. Rates trading advanced to $1,206.1 billion from the year-ago figure of $826.3 billion.
Total expenses of $92.5 million increased from $79.6 million in the prior-year quarter, primarily due to a rise in costs related to employee compensation and benefits, technology and communications, and general and administrative.
Operating income slumped to $72.6 million for the quarter under review from $91.7 million in the December quarter of 2020. Operating margin of 44% declined 950 basis points year over year.
Balance Sheet (as of Dec 31, 2021)
The company exited the fourth quarter with total cash and cash equivalents of $506.7 million, which increased from $432.7 million at third quarter-end.
Total assets of $1,530.5 million declined sequentially from $1,611.9 million. Total stockholders’ equity was $1,041.3 million at fourth quarter-end, declining from $1,055.3 million in the prior quarter.
Cash Flow
Operating cash flow for the fourth quarter was $145.7 million, significantly down from $227.6 million a year ago. During the quarter, the company generated free cash flow of $72 million, which dipped from $95.3 million in the comparable period last year.
Shareholder Value Boost
MarketAxess’ board of directors announced a 6% hike in quarterly cash dividend to 70 cents per share, which will be paid out on Feb 23 to shareholders of record as of Feb 9.
In the fourth quarter, the company bought back 111,694 shares worth $45 million. Further, MKTX announced a new share buyback program of $150 million, which will commence from first-quarter 2022.
Guidance
Expenses are projected in the range of $385-$415 million, whose mid-point indicates an increase from the 2021 level of $361.7 million. It expects capital expenditure for 2022 within $58-$62 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -12.29% due to these changes.
VGM Scores
Currently, MarketAxess has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise MarketAxess has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.