Estimates for Nasdaq, Inc. (NDAQ - Free Report) have been revised upward over the past 7 days, reflecting analysts’ confidence in the stock, ahead of its first-quarter earnings. The stock has seen the Zacks Consensus Estimate for 2018 and 2019 earnings being raised 0.4% and 0.2% to $4.84 and $5.31, respectively.
Nasdaq offers trading and clearing services across various asset classes including equities, derivatives, debt, commodities, structured products and exchange traded funds (ETFs); capital formation solutions; financial services and exchanges technology; market data products and financial indexes.
Shares of this Zacks Rank #3 (Hold) securities exchange have rallied 12.4% year to date, outperforming the industry’s growth of 4.3%.
Let’s focus on the factors making Nasdaq a stock to hold on to for greater returns.
Improving Top Line: Last few years saw the top line rise at Nasdaq, witnessing a two-year CAGR of nearly 8%, owing to both organic and inorganic strategic expansions.
Compelling Inorganic Growth Story: Strategic buyouts helped Nasdaq expedite growth profile, expand its technology offering, gain direct access to the Canadian equities market and fortify its Corporate Solutions business. Acquisitions continue to enhance the company’s capabilities and have already been accretive to operational results.
Growth Initiatives: Nasdaq deepened its focus on Market Technology and Information Services businesses, offering biggest growth opportunities per the company’s developmental strategies. The company also sets sights on its core special marketplace platform businesses. However, it intends to lower capital resources for investment in business that fails to offer considerable growth for Nasdaq.
Nasdaq’s organic growth has been aided by its strategy to accelerate its non-transaction revenue base, including market technology, listing and information revenues plus management's medium-term outlook, calling for mid-single digit growth over the next three to five years.
Intelligent Capital Management: Nasdaq boasts a healthy balance sheet and cash position along with modest operating cash flow from its diverse business model. Banking on this strength, the board of directors has recently hiked its quarterly dividend by 16%. While the raise marks four-year CAGR of 35.6%, the company has a $500 million share buyback authorization. Its dividend yield betters the industry average, making the stock an attractive pick for yield-seeking investors.
Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $8.41, representing a year-over-year increase of 19.2% on 4.9% higher revenues of $2.6 billion.
For 2019, the Zacks Consensus Estimate for earnings per share stands at $5.31 on $2.6 billion revenues, translating into a respective 9.7% and 3.1% year-over-year increase.
Nasdaq has expected long-term earnings per share growth of 9.7%.
Underpriced: Looking at the company’s price-to-book ratio — the best multiple for valuing securities exchanges because of large variations in their earnings results from one quarter to the next — shares are underpriced at the current level. The company has a trailing 12-month P/B ratio of 2.43, falling below the industry average of 2.76.
Positive Earnings Surprise History: The company flaunts an encouraging earnings surprise history, having outpaced the Zacks Consensus Estimate in each of the trailing five quarters with an average beat of 3.99%. This trend of consecutive estimate beats indicates the company’s operational excellence.
In fact, our proven model states that the company is poised for an earnings beat in the to-be-reported quarter. This is because the stock has the right combination of the following two key ingredients for a positive earnings surprise, a favorable Zacks Rank #3 (Hold), which increases the predictive power of ESP and an Earnings ESP of +1.06% to be confident about an estimate beat.
Stocks to Consider
Some better-ranked stocks from the finance sector are CME Group Inc. (CME - Free Report) , CNA Financial Corporation. (CNA - Free Report) and AllianceBernstein Holding L.P. (AB - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CME Group operates in contract markets for the trading of futures and options on futures contracts worldwide. It came up with an average four-quarter beat of 2.15%.
CNA Financial provides commercial property and casualty insurance products, primarily in the United States. It pulled off an average four-quarter positive earnings surprise of 46.88%.
Investment manager AllianceBernstein provides research services to its clients. It delivered an average four-quarter beat of 8.54%.
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