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MarketAxess (MKTX) Q3 Earnings Miss on Higher Expenses
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MarketAxess Holdings Inc. (MKTX - Free Report) reported third-quarter 2023 earnings per share of $1.46, which missed the Zacks Consensus Estimate by 2%. Moreover, the bottom line declined from $1.58 per share a year ago.
Total revenues increased 0.1% year over year to $172.3 million in the quarter under review. However, the top line missed the consensus mark by 0.6%.
The quarterly results received a blow from low credit spread volatility, an elevated expense level, deteriorating commission revenues and lower overall credit trading.The negatives were partially offset by solid Eurobonds’ performance and higher adoption of its Composite+ pricing engine.
MarketAxess Holdings Inc. Price, Consensus and EPS Surprise
Commission revenues declined 1.7% year over year to $150.5 million in the third quarter and missed our estimate by 8.9%. Information services revenues registered a record $11.8 million, which increased 21.5% year over year and beat our estimate by 8.3% on the back ofstrong adoption of the company’s algorithmic pricing engine, Composite+. Meanwhile, post-trade services revenues of $9.8 million increased 9.3% year over year in the quarter under review, beating our estimate of $9.1 million.
Total expenses of $105.4 million escalated 10% year over year, surpassing our estimate of $105.1 million. The year-over-year growth was primarily due to increased employee compensation and benefits, technology and communication expenses, and marketing and occupancy costs.
MarketAxess reported an operating income of $66.9 million, which decreased 12.3% year over year in the third quarter.
Trading Volumes
MarketAxess’ high-grade trading volume declined 0.5% year over year to $326.3 billion, missing our estimate by 11.3%. The average daily volume (ADV) of the same product category rose 1.1% year over year to $5,179 million but missed our estimate by 10.2%.
Other credit trading volume of $25,185 million rose 4.2% year over year, whereas ADV of the same product category jumped 1.7% year over year to $400 million in the third quarter.
The emerging markets’ trading volume and ADV rose 6.3% and 8%, respectively, each on a year-over-year basis. Trading volume and ADV of MKTX’s Eurobonds rose 18.3% and 18.2%, respectively, year over year.
Total credit trading volume increased 0.3% year over year to $704.3 billion in the quarter under review, while ADV reached $11.2 billion (up 1.7% year over year). Total rates’ trading volume and ADV declined 12.8% and 11.4%, respectively, year over year.
Balance Sheet (as of Sep 30, 2023)
MarketAxess exited the third quarter of 2023 with cash and cash equivalents of $420.5 million, which decreased from the 2022-end figure of $430.7 million. Total assets of $1,737.5 million increased from $1,607.8 million at 2022-end.
The company had no outstanding borrowing under its credit facility at the third-quarter end. Total stockholders’ equity rose from $1,081.1 million at 2022-end to $1,191 million at the third-quarter end.
Cash Flows
MarketAxess generated cash from operations of $79.2 million in the third quarter, down from $85.1 million a year ago. However, free cash flow of $74.8 million increased from $70 million a year ago.
Dividend Update
Management approved a quarterly cash dividend of 72 cents per share, which will be paid out on Nov 22, to shareholders of record as of Nov 8.
2023 Guidance
Management revised expense guidance upward between $432 million and $438 million for this year, the mid-point of which indicates an 11.1% increase from the 2022 reported figure.
Capital expenditure was estimated between $52 million and $58 million for 2023.
The effective tax rate is likely to be 25-26%.
Zacks Rank
MarketAxess currently has a Zacks Rank #3 (Hold).
Other Finance Sector Releases
Of the other Finance sector players that have reported third-quarter results so far, the bottom-line results of The Goldman Sachs Group, Inc. (GS - Free Report) , M&T Bank Corporation (MTB - Free Report) and Morgan Stanley (MS - Free Report) beat the Zacks Consensus Estimate.
Goldman Sachs reported third-quarter 2023 EPS of $5.47, surpassing the Zacks Consensus Estimate of earnings of $5.32 per share. Also, the bottom line fell 34% from the year-earlier quarter. Net earnings of $2.05 billion plunged 33% from the prior-year quarter. Net revenues of $11.82 billion fell 1% from the year-ago quarter. Nonetheless, the top line surpassed the consensus estimate of $11 billion. The Asset & Wealth Management division of GS generated revenues of $3.23 billion in the reported quarter, down 20% year over year. The Platform Solutions division’s revenues were $578 million, rising 53% year over year.
M&T Bank’s third-quarter 2023 net operating EPS of $4.05, which surpassed the Zacks Consensus Estimate of $3.94. The bottom line compared favorably with the earnings of $3.83 per share earned in the year-ago quarter. Net income available to common shareholders was $664 million, which increased 6.9% from the prior-year quarter. MTB’s quarterly revenues were $2.34 billion, beating the consensus estimate of $2.32 billion. Also, the reported figure increased 4% year over year. Total non-interest income was $560 million, down marginally year over year. The efficiency ratio was 53.7%, up from 53.6% in the year-earlier quarter.
Morgan Stanley posted third-quarter 2023 earnings of $1.38 per share, which surpassed the Zacks Consensus Estimate of earnings of $1.27 per share. However, the bottom line reflects a decline of 6% from the year-ago quarter. Fixed-income trading revenues decreased 11%, while equity trading income was up 2% year over year. While equity underwriting fees of MS increased 9%, fixed income underwriting income was down 31% and advisory fees tanked 35%. Therefore, total IB fees (in the Institutional Securities division) decreased 27% from the prior-year quarter. Net revenues were $13.27 billion, up 2% from the prior-year quarter. The top line also beat the consensus estimate of $13.08 billion. Total non-interest revenues of $11.3 billion increased 8%.
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MarketAxess (MKTX) Q3 Earnings Miss on Higher Expenses
MarketAxess Holdings Inc. (MKTX - Free Report) reported third-quarter 2023 earnings per share of $1.46, which missed the Zacks Consensus Estimate by 2%. Moreover, the bottom line declined from $1.58 per share a year ago.
Total revenues increased 0.1% year over year to $172.3 million in the quarter under review. However, the top line missed the consensus mark by 0.6%.
The quarterly results received a blow from low credit spread volatility, an elevated expense level, deteriorating commission revenues and lower overall credit trading.The negatives were partially offset by solid Eurobonds’ performance and higher adoption of its Composite+ pricing engine.
MarketAxess Holdings Inc. Price, Consensus and EPS Surprise
MarketAxess Holdings Inc. price-consensus-eps-surprise-chart | MarketAxess Holdings Inc. Quote
Quarterly Operational Update
Commission revenues declined 1.7% year over year to $150.5 million in the third quarter and missed our estimate by 8.9%. Information services revenues registered a record $11.8 million, which increased 21.5% year over year and beat our estimate by 8.3% on the back ofstrong adoption of the company’s algorithmic pricing engine, Composite+. Meanwhile, post-trade services revenues of $9.8 million increased 9.3% year over year in the quarter under review, beating our estimate of $9.1 million.
Total expenses of $105.4 million escalated 10% year over year, surpassing our estimate of $105.1 million. The year-over-year growth was primarily due to increased employee compensation and benefits, technology and communication expenses, and marketing and occupancy costs.
MarketAxess reported an operating income of $66.9 million, which decreased 12.3% year over year in the third quarter.
Trading Volumes
MarketAxess’ high-grade trading volume declined 0.5% year over year to $326.3 billion, missing our estimate by 11.3%. The average daily volume (ADV) of the same product category rose 1.1% year over year to $5,179 million but missed our estimate by 10.2%.
Other credit trading volume of $25,185 million rose 4.2% year over year, whereas ADV of the same product category jumped 1.7% year over year to $400 million in the third quarter.
The emerging markets’ trading volume and ADV rose 6.3% and 8%, respectively, each on a year-over-year basis. Trading volume and ADV of MKTX’s Eurobonds rose 18.3% and 18.2%, respectively, year over year.
Total credit trading volume increased 0.3% year over year to $704.3 billion in the quarter under review, while ADV reached $11.2 billion (up 1.7% year over year). Total rates’ trading volume and ADV declined 12.8% and 11.4%, respectively, year over year.
Balance Sheet (as of Sep 30, 2023)
MarketAxess exited the third quarter of 2023 with cash and cash equivalents of $420.5 million, which decreased from the 2022-end figure of $430.7 million. Total assets of $1,737.5 million increased from $1,607.8 million at 2022-end.
The company had no outstanding borrowing under its credit facility at the third-quarter end. Total stockholders’ equity rose from $1,081.1 million at 2022-end to $1,191 million at the third-quarter end.
Cash Flows
MarketAxess generated cash from operations of $79.2 million in the third quarter, down from $85.1 million a year ago. However, free cash flow of $74.8 million increased from $70 million a year ago.
Dividend Update
Management approved a quarterly cash dividend of 72 cents per share, which will be paid out on Nov 22, to shareholders of record as of Nov 8.
2023 Guidance
Management revised expense guidance upward between $432 million and $438 million for this year, the mid-point of which indicates an 11.1% increase from the 2022 reported figure.
Capital expenditure was estimated between $52 million and $58 million for 2023.
The effective tax rate is likely to be 25-26%.
Zacks Rank
MarketAxess currently has a Zacks Rank #3 (Hold).
Other Finance Sector Releases
Of the other Finance sector players that have reported third-quarter results so far, the bottom-line results of The Goldman Sachs Group, Inc. (GS - Free Report) , M&T Bank Corporation (MTB - Free Report) and Morgan Stanley (MS - Free Report) beat the Zacks Consensus Estimate.
Goldman Sachs reported third-quarter 2023 EPS of $5.47, surpassing the Zacks Consensus Estimate of earnings of $5.32 per share. Also, the bottom line fell 34% from the year-earlier quarter. Net earnings of $2.05 billion plunged 33% from the prior-year quarter. Net revenues of $11.82 billion fell 1% from the year-ago quarter. Nonetheless, the top line surpassed the consensus estimate of $11 billion. The Asset & Wealth Management division of GS generated revenues of $3.23 billion in the reported quarter, down 20% year over year. The Platform Solutions division’s revenues were $578 million, rising 53% year over year.
M&T Bank’s third-quarter 2023 net operating EPS of $4.05, which surpassed the Zacks Consensus Estimate of $3.94. The bottom line compared favorably with the earnings of $3.83 per share earned in the year-ago quarter. Net income available to common shareholders was $664 million, which increased 6.9% from the prior-year quarter. MTB’s quarterly revenues were $2.34 billion, beating the consensus estimate of $2.32 billion. Also, the reported figure increased 4% year over year. Total non-interest income was $560 million, down marginally year over year. The efficiency ratio was 53.7%, up from 53.6% in the year-earlier quarter.
Morgan Stanley posted third-quarter 2023 earnings of $1.38 per share, which surpassed the Zacks Consensus Estimate of earnings of $1.27 per share. However, the bottom line reflects a decline of 6% from the year-ago quarter. Fixed-income trading revenues decreased 11%, while equity trading income was up 2% year over year. While equity underwriting fees of MS increased 9%, fixed income underwriting income was down 31% and advisory fees tanked 35%. Therefore, total IB fees (in the Institutional Securities division) decreased 27% from the prior-year quarter. Net revenues were $13.27 billion, up 2% from the prior-year quarter. The top line also beat the consensus estimate of $13.08 billion. Total non-interest revenues of $11.3 billion increased 8%.