Nasdaq (NDAQ) Beats On Q1 Earnings, Tweaks Expense Outlook

Nasdaq, Inc. (NASDAQ:NDAQ) reported first-quarter 2017 adjusted earnings per share of $1.10 per share, which beat the Zacks Consensus Estimate by 5 cents. Also, the bottom line improved 19% year over year.

Higher revenues as well as growth across all segments supported the upside. However, the improvement was limited by an increase in expenses.

On a GAAP basis, the company’s net income increased 27% year over year to 21 cents per share.

Performance in Detail

Nasdaq’s revenues of $583 million increased 9% year over year. The Zacks Consensus Estimate was $594 million. This was primarily due to a $50 million positive impact from acquisitions and organic growth of $15 million.

Adjusted operating expenses were $306 million in the reported quarter, up 9.3% year over year. This was mainly due to higher operating expenses related to the acquisitions closed in 2016. As of Mar 31, 2017, Nasdaq achieved $50 million in annualized run-rate cost synergies for the acquisitions in 2016 out of the targeted $60 million. Notably, the company revised its 2017 non-GAAP operating expense to the range of $1.26–$1.30 billion from $1.26–$1.31 billion guided earlier.

Nasdaq, Inc. Price, Consensus and EPS Surprise

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

Segment wise, net revenue at Market Services jumped 8.5% from the year-ago quarter to $218 million. The upside was driven by higher revenues from the ISE and Nasdaq CXC acquisitions.

Revenues at Corporate Services climbed 11.9% year over year to $160 million. This was mainly due to the inclusion of revenues from the Marketwired and Boardvantage acquisitions in the Corporate Solutions business.

Information Services revenues rose 3.8% year over year to $138 million. Higher proprietary data products revenues and the inclusion of revenues from the acquisitions of ISE and Nasdaq CXC led to the increase in data products revenues. Additionally, revenues from index licensing and services grew from the prior-year quarter.

Revenues at Market Technology increased 17.5% year over year to $67 million due to organic revenue growth. Market Technology order intake totaled $47 million. The Nasdaq Stock Market witnessed 42 new listings during the first quarter, 17 of which were IPOs.

Financial Update

Nasdaq had cash and cash equivalents of $464 million as of Mar 31, 2017, up 11%. As of Mar 31, 2017, debt decreased 11% from the 2016-end level to $3.2 billion.

Dividend and Share Repurchase Update

The board of directors approved a 19% increase in quarterly dividend to 38 cents per share. The company spent about $156 million to buy back 2.2 million shares.

Our Take

Nasdaq’s results reflect decent performance. Growth looks encouraging as the company remains focused on expansion through acquisitions and organic initiatives that enable entry and open up cross-selling opportunities into new markets. The top line should also benefit from the company’s consistent focus on its strategy to accelerate non-transaction revenue base, including technology, listing and information revenues. However, higher expenses and stiff competition remain key concerns.

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

Other securities exchanges like CME Group Inc. (NASDAQ:CME) , CBOE Holdings, Inc. (NASDAQ:CBOE) and Intercontinental Exchange, Inc. (NYSE:ICE) are expected to release results around Apr 27, May 9 and May 3, respectively.

Looking for Ideas with Even Greater Upside?

Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>