Nasdaq (NDAQ) Up 4.7% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Nasdaq, Inc. NDAQ. Shares have added about 4.7% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is NDAQ 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.

Nasdaq (NDAQ) Beats on Q1 Earnings, Trims Expense Guidance

Nasdaq, Inc. reported first-quarter 2018 adjusted earnings per share of $1.24, beating the Zacks Consensus Estimate of $1.18. The bottom line also improved 31% year over year.

Improved revenues, higher volumes, lower tax incidence and a solid market share aided this upside. The company witnessed revenue improvement across all its segments.

Performance in Detail

Nasdaq’s revenues recorded $666 million, improving 15% year over year. The top line surpassed the Zacks Consensus Estimate of $644 million, primarily owing to 9% organic growth, a $17-million favorable impact on the back of changes in forex rates and a $15-million impact from acquisitions.

Adjusted operating expenses were $353 million in the reported quarter, up 15% from the year-ago quarter. This includes a $19-million increase from acquisitions, an $18-million organic expense rise and a $10-million unfavorable impact from the changes in foreign exchange rates.

Nasdaq projects 2018 non-GAAP operating expense in the range of $1.295-$1.335 billion, down from the earlier guided range of $1.375-$1.415 billion. This primarily reflects the closing of the divestitures of the Public Relations Solutions and Digital Media Services businesses in April.

Segment wise, net revenues at Market Services increased 14.7% from the year-ago quarter to $250 million. This upside was driven by improved revenues from equity derivatives, cash equity trading, fixed income and commodities trading plus clearing and trade management services.

Revenues at Corporate Services grew 7.5% year over year to $172 million, mainly owing to a rise in Corporate Solutions revenues and Listings Services revenues.

Information Services revenues rose 26.1% year over year to $174 million. Higher revenues at Data Products as well as Index Licensing and Services drove the upside.

Revenues at Market Technology improved 7.7% year over year to $70 million on the back of higher change request revenues and software as a service revenues besides a favorable impact from the changes in foreign exchange rates. Market Technology order intake totaled $55 million.

Financial Update

Nasdaq had cash and cash equivalents of $429 million as of Mar 31, 2018, up 7.5% from 2017-end level. As of Mar 31, 2018, long-term debt decreased 15.3% over 2017-end level to $3.2 billion.

Dividend and Share Repurchase Update

During the quarter under review, the company bought back shares worth $99 million and paid $63 million in dividends. As of Mar 31, 2018, the company had $627 million shares remaining under its repurchase authorization.

On Mar 28, 2018, the company hiked its quarterly dividend by 16% to 44 cents per share.

Business Highlights

On Apr 16, 2018, Nasdaq closed the sale of its Public Relations Solutions and Digital Media Services businesses to West Corporation.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There have been two revisions higher for the current quarter compared to two lower.

Nasdaq, Inc. Price and Consensus

Nasdaq, Inc. Price and Consensus | Nasdaq, Inc. Quote

VGM Scores

At this time, NDAQ has an average Growth Score of C, however its Momentum is doing a bit better with a B. However, 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 C. 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 momentum investors than growth investors.

Outlook

NDAQ has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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