MarketAxess (MKTX) Q3 Earnings, Revenues Beat Estimates

MarketAxess Holdings Inc.’s (NASDAQ:MKTX) third-quarter 2016 operating net income of 82 cents per share surpassed the Zacks Consensus Estimate of 78 cents by 5.1%. Also, the bottom line improved 36.7% from the year-ago quarter.

The bottom-line growth was primarily driven by a strong top-line performance. The company witnessed continued growth owing to persistent gains in the U.S. corporate bond volume and an increase in market share. Apart from that, MarketAxess experienced strong momentum in European fixed income and emerging market debt trading. The rapid growth in open trading participation among dealers and investors also supported market liquidity in global credit markets.

Operational Update

MarketAxess posted record total revenue of $90.3 million that beat the Zacks Consensus Estimate of $90 million. Revenues also increased 21.7% year over year. The top-line improvement can be attributed to 24.6% higher commission revenues as well as a 115% surge in investment income, both on a year-over-year basis.

Total trading volume of MarketAxess surged 34.4% year over year to a record $322.1 billion.

Total expense of MarketAxess increased 25.7% year over year to $43.9 million. The rise in expenses stemmed from a 14.3% increase in employee compensation and benefits costs, 9% increase in technology and communications, 35.3% rise in professional and consulting fees, 61% increase in marketing and advertising, and 5.7% increase in general and administrative expenses, all on year-over-year basis. Employee compensation and benefits costs mainly increased due to growth in headcount and higher performance-based incentive accrual.

At the end of the third quarter, pre-tax income grew 31.1% year over year to $46.4 million. Pre-tax margin was 51.3% compared with 47.7% in the third quarter of 2015.

Financial Update

MarketAxess exited the third quarter with total assets of $502.2 million, up 14.6% from year-end 2015.

Total cash, cash equivalents and investment of $332.1 million as of Sep 30, 2016 increased 17% from year-end 2015.

At the end of the reported quarter, MarketAxess reported total stockholder’s equity of $451.7 million, up 15.6% year over year.

Dividend and Share Repurchase Update

The board of directors of MarketAxess declared a quarterly cash dividend of 26 cents per share. The dividend will be paid on Nov 23, to stockholders on record at the close of business on Nov 9, 2016.

During the third quarter, MarketAxess bought back nearly 0.1 million shares worth $8.5 million under its $25 million share repurchase program. As of Sep 30, 2016, the company was left with shares worth $11.2 million available for repurchase. In Oct 2016, the board approved an additional $50.0 million of share repurchase.

MARKETAXESS HLD Price, Consensus and EPS Surprise

Zacks Rank and Performance of Other Insurers

MarketAxess presently carries Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among the other insurers that have reported their third-quarter earnings so far, the bottom line at Progressive Corp. (NYSE:PGR) and The Travelers Companies Inc.. (NYSE:TRV) beat their respective Zacks Consensus Estimate, while RLI Corp. (NYSE:RLI) missed the same.

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