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Why Is Nasdaq (NDAQ) Up 4.2% 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 4.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is 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 its most recent earnings report in order to get a better handle on the important catalysts.
Nasdaq Beats on Q2 Earnings, Tightens Expense View
Nasdaq reported second-quarter 2023 adjusted earnings per share of 71 cents, beating the Zacks Consensus Estimate of 65 cents. The bottom line improved 3% year over year. The improvement was mainly driven by organic growth and solid results at the Solutions segment.
Performance in Detail
Nasdaq’s revenues of $925 million increased 4% year over year. The upside can primarily be attributed to 4% impact from organic growth, including contributions from all segments. It was partially offset by a $2 million decrease from the impact of changes in FX rates and a $2 million decrease from the net impact of an acquisition and divestiture. The top line beat the Zacks Consensus Estimate of $910 million.
Annualized Recurring Revenue (ARR) increased 6% year over year. Annualized SaaS revenues increased 11% and represented 36% of ARR.
Revenues at Trading Services decreased 1% year over year to $250 million. The increase reflects no organic growth and a $2 million negative impact from changes in FX rates.
Revenues at the Solutions segment increased 6% year over year to $647 million, driven by a 6% impact from organic growth.
Adjusted operating expenses were $441 million, up 7% from the year-ago period. The improvement primarily reflects increased expenses associated with the continued investment in people and its businesses to drive long-term growth, partially offset by changes in FX rates. Our estimate for operating expenses was $456 million.
Operating margin of 52% contracted 200 basis points year over year. The Nasdaq stock market welcomed 62 new company listings in the second quarter of 2023, including 23 initial public offerings. The number of listed companies was 4,106 at quarter end.
Financial Update
Nasdaq had cash and cash equivalents of $5.3 billion as of Jun 30, 2023, up from $0.5 billion at 2022-end. Long-term debt increased to $9.8 billion as of Jun 30, 2023 from $4.7 billion at 2022 end.
Capital Deployment
Nasdaq returned $109 million to shareholders in the second quarter of 2023 through dividends. The board of directors approved a dividend of 22 cents per share. The dividend will be paid out on Sep 29, 2023 to shareholders of record at the close of business on Sep 15, 2023. As of Jun 30, 2023, $491 million remained under the board-authorized share repurchase program.
Business Update
In June, NDAQ agreed to buy Adenza for $10.5 billion in cash and stock. The transaction accelerates Nasdaq’s ability to become a leading provider of capital markets risk and regulatory technology. To finance the acquisition, NDAQ secured about $5 billion through an oversubscribed debt offering. As part of its focus on prioritizing high-value opportunities, Nasdaq announced plans to sell its European energy trading and clearing business.
Guidance
Nasdaq expects 2023 non-GAAP operating expenses in the range of $1.785 billion to $1.815 billion, compared with the prior expectation of $1.78 billion to $1.84 billion. Nasdaq forecasts non-GAAP tax rate in the range of 24-26% in 2023.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, Nasdaq has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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. Notably, Nasdaq has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Nasdaq (NDAQ) Up 4.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Nasdaq (NDAQ - Free Report) . Shares have added about 4.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is 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 its most recent earnings report in order to get a better handle on the important catalysts.
Nasdaq Beats on Q2 Earnings, Tightens Expense View
Nasdaq reported second-quarter 2023 adjusted earnings per share of 71 cents, beating the Zacks Consensus Estimate of 65 cents. The bottom line improved 3% year over year. The improvement was mainly driven by organic growth and solid results at the Solutions segment.
Performance in Detail
Nasdaq’s revenues of $925 million increased 4% year over year. The upside can primarily be attributed to 4% impact from organic growth, including contributions from all segments. It was partially offset by a $2 million decrease from the impact of changes in FX rates and a $2 million decrease from the net impact of an acquisition and divestiture. The top line beat the Zacks Consensus Estimate of $910 million.
Annualized Recurring Revenue (ARR) increased 6% year over year. Annualized SaaS revenues increased 11% and represented 36% of ARR.
Revenues at Trading Services decreased 1% year over year to $250 million. The increase reflects no organic growth and a $2 million negative impact from changes in FX rates.
Revenues at the Solutions segment increased 6% year over year to $647 million, driven by a 6% impact from organic growth.
Adjusted operating expenses were $441 million, up 7% from the year-ago period. The improvement primarily reflects increased expenses associated with the continued investment in people and its businesses to drive long-term growth, partially offset by changes in FX rates. Our estimate for operating expenses was $456 million.
Operating margin of 52% contracted 200 basis points year over year. The Nasdaq stock market welcomed 62 new company listings in the second quarter of 2023, including 23 initial public offerings. The number of listed companies was 4,106 at quarter end.
Financial Update
Nasdaq had cash and cash equivalents of $5.3 billion as of Jun 30, 2023, up from $0.5 billion at 2022-end. Long-term debt increased to $9.8 billion as of Jun 30, 2023 from $4.7 billion at 2022 end.
Capital Deployment
Nasdaq returned $109 million to shareholders in the second quarter of 2023 through dividends. The board of directors approved a dividend of 22 cents per share. The dividend will be paid out on Sep 29, 2023 to shareholders of record at the close of business on Sep 15, 2023. As of Jun 30, 2023, $491 million remained under the board-authorized share repurchase program.
Business Update
In June, NDAQ agreed to buy Adenza for $10.5 billion in cash and stock. The transaction accelerates Nasdaq’s ability to become a leading provider of capital markets risk and regulatory technology. To finance the acquisition, NDAQ secured about $5 billion through an oversubscribed debt offering. As part of its focus on prioritizing high-value opportunities, Nasdaq announced plans to sell its European energy trading and clearing business.
Guidance
Nasdaq expects 2023 non-GAAP operating expenses in the range of $1.785 billion to $1.815 billion, compared with the prior expectation of $1.78 billion to $1.84 billion. Nasdaq forecasts non-GAAP tax rate in the range of 24-26% in 2023.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, Nasdaq has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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. Notably, Nasdaq has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.