MarketAxess (MKTX) Up 5.4% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for MarketAxess Holdings Inc. MKTX. Shares have added about 5.4% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is MKTX due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

MarketAxess Q1 Earnings Top on Higher Trading Volumes

MarketAxess Holdings Inc.’s first-quarter 2018 earnings per share of $1.27 beat the Zacks Consensus Estimate by 4.1% and grew 14% year over year.

Better-than-expected results were driven by an increase in total trading volumes.

Operational Update

First-quarter revenues were a record $115 million, up 11.4% year over year and ahead of the Zacks Consensus Estimate by 0.5%.

Commission revenues increased 9.3% year over year to $102.8 million.

Revenues from post trade services were up a good 77% year over year led by a combination of new customers added and the impact of a weaker U.S. dollar versus the pound sterling.

Total trading volume increased 18% in the reported quarter to $465 billion year over year, driven by record trading volume in U.S. high-grade and other credit products. Additionally, the trading volume with international clients reached a record $130 billion, representing an increase of 30%.

Total expenses at MarketAxess increased 14% from the prior-year quarter to $54.5 million. This rise was due to higher employee compensation and benefit cost, technology and communication costs and occupancy costs.

The effective tax rate was 21.4% in the first quarter, down from 23.6% in the year-ago quarter, due to a reduction in the federal income tax rate and other changes associated with the Tax Cuts & Jobs Act.

Financial Update

Total assets were $589.3 million as of Mar 31, 2018, up 1.4% from year-end 2017.

Total cash and cash equivalents were $156.2 million, down 6.5% from year-end 2017.

Free cash flow totaled $22.5 million, down 7.8% year over year.

Share Repurchase and Dividend Update

MarketAxess bought back shares worth $6.3 million in the first quarter.
The company's board of directors declared a quarterly cash dividend of 42 cents per share. The same will be paid on May 23, 2018 to stockholders of record as of the close of business on May 9, 2018.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.

MarketAxess Holdings Inc. Price and Consensus

MarketAxess Holdings Inc. Price and Consensus | MarketAxess Holdings Inc. Quote

VGM Scores

At this time, MKTX has a great Growth Score of A, though it is lagging a bit on the momentum front 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise MKTX 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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