Nasdaq, Inc. (NASDAQ:NDAQ) is slated to report third-quarter 2017 results on Oct 25, before the market opens. Last quarter, the company delivered a positive earnings surprise of 6.25%. Let’s see how things are shaping up for this announcement.
We expect the company’s Market Services segment, a major contributor to Nasdaq’s total revenues, to not only boost top-line growth but also improve the company’s overall performance in the soon-to-be-reported quarter. Higher revenues from the buyout of International Securities Exchange (ISE) and European cash equities are expected to lead to an improvement in Market Services’ revenues. In fact, the Zacks Consensus Estimate for Market Services revenues is currently pegged at $147 million, an increase of 7.3% from the year-ago quarter.
The aforementioned segment is likely to have delivered positive organic growth, primarily driven by a solid market share performance across its largest trading categories — U.S. options, U.S. equities and European equities, together with continued positive organic growth in Trade Management Services.
Even though the company has been displaying weak equity trading performance over a considerable period of time, Nasdaq’s organic growth has seen a consistent rise. Therefore, the company has likely delivered noticeable organic growth in the quarter to be reported, driven by its strategy of expediting the non-transaction revenue base that includes market technology, listing and information revenues.
However, the company is likely to have incurred higher expenses in the yet-to-be-reported quarter, mainly due to development and diversification of its business. This in turn has likely restricted operating margin expansion.
Additionally, the company might witness lower cash equity trading revenues, owing to decrease in revenue per contract and a weak trading activity in the industry, along with regulatory changes and adverse forex impact may lead to lower cash equity trading revenues. To that end, the Zacks Consensus Estimate for net cash equity trading revenues is currently pegged at $60 million, reflecting a slip of 1.6% from the prior-year quarter. Decreased cash equity trading revenues can weigh on the bottom-line of the company.
Why a Likely Positive Surprise?
Our proven model shows that Nasdaq has the right combination of two key ingredients to beat estimates this quarter.
Zacks ESP: Nasdaq has an Earnings ESP of +0.49%, representing the difference between the Most Accurate estimate and the Zacks Consensus Estimate. This is because the Most Accurate estimate of $1.03 is pegged higher than the Zacks Consensus Estimate of $1.02. The positive ESP is indicative of a likely earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Nasdaq carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP as stocks with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 along with a positive Earnings ESP, have significantly higher chances of an earnings beat.
Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Some other stocks worth considering from the finance sector with the right combination of elements to surpass estimates this quarter are as follows:
Prudential Financial (NYSE:PRU) is set to report third-quarter earnings on Nov 1 with an Earnings ESP of +0.07% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lincoln National Corporation (NYSE:LNC) has an Earnings ESP of +0.05% and also holds a Zacks Rank of 2. The company is slated to report third-quarter earnings on Nov 1.
American Equity Investment Life Holding Company (NYSE:AEL) has an Earnings ESP of +0.40% and sports a Zacks Rank of 1. The company is set to report third-quarter earnings on Nov 6.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
Lincoln National Corporation (LNC): Free Stock Analysis Report
American Equity Investment Life Holding Company (AEL): Free Stock Analysis Report
Prudential Financial, Inc. (PRU): Free Stock Analysis Report
Nasdaq, Inc. (NDAQ): Free Stock Analysis Report
Original post
Zacks Investment Research