Securities Exchange Stock Q3 Earnings On Oct 26: NDAQ, MKTX

The Q3 earnings season is underway with 810 companies having reported their quarterly results so far. According to our latest Earnings Preview report, the performance of the 116 index members (accounting for 30% of the index’s total market capitalization) that have already reported their financial numbers this quarter indicate that total earnings have improved 3.3% on 1.8% higher revenues. The beat ratio seems strong with 80.2% companies beating the bottom line expectations and 62.9% outperforming on the top-line front.

The Finance sector (one of the 16 Zacks sectors) has started the Q3 earnings season on a strong note. In fact, the financial performance of 33.3% companies from this sector that have already reported their quarterly results indicates 7.9% earnings growth due to a 5.1% increase in revenues, on a year-over-year basis. Moreover, the beat ratios of 90% for the bottom line and 86.7% for the top line compare favorably with the S&P 500.

The Finance sector is highly diversified and includes several industries like insurance, banks and securities exchanges to name a few.

We believe that the securities exchanges have witnessed strong trading volume in Q3. Compelling product offering (including expansion of futures products into emerging markets and OTC offerings), prudent expense management, operating leverage, higher listing and strategic acquisitions should also have a favorable impact on the performance of these companies. Increase in electronic trading volume is another positive.

However, a soft derivative market and competition raise concerns. Soft interest rate environment and limited credit availability might offset the aforesaid positives to some extent.

With more than 171 index members set to release Q3 results this week, let’s find out how these two securities exchanges might perform when they report their quarterly numbers on Oct 26.

Nasdaq Inc. (NASDAQ:NDAQ) offers trading across various asset classes including equities, derivatives, debt, commodities, structured products and exchange traded funds (ETFs), capital formation solutions, financial services and exchanges technology, market data products, and financial indexes. The company delivered a positive surprise of 3.41% in the last quarter. Nasdaq has an Earnings ESP of -1.10% and a Zacks Rank #4 (Sell). The Zacks Consensus Estimate for the quarter is pegged at 91 cents per share. Please note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Robust operational activities, strong listings, and prudent business management are likely to boost revenues for the securities exchange. Nasdaq is likely to witness organic growth in the Technology Solutions segment, Listing Services and Corporate Solutions segments. However increase in expenses, soft trading volumes and adverse forex are negatives. (Read more: Will Nasdaq Pull a Surprise this Earnings Season?)

With respect to the surprise trend, Nasdaq surpassed expectations in three of the last four quarters, with an average beat of 2.00%.

MarketAxess Holdings Inc. (NASDAQ:MKTX) offers institutional investors access to global liquidity in products like U.S. high-grade corporate bonds, emerging markets and high-yield bonds, European bonds, U.S. agency bonds, credit derivatives and other fixed-income securities. The company posted a positive earnings surprise of 1.50% in the last quarter. According to our quantitative model, a company needs the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) – to increase its odds of an earnings surprise. Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.

MarketAxess has an Earnings ESP of +3.53% and a Zacks Rank #3, which makes us confident of an earnings beat. You can see the complete list of today’s Zacks Rank #1 stocks here.

With respect to the surprise trend, MarketAxess surpassed expectations in two of the last four quarters, but with an average miss of 0.45%.

Keep an eye on our full earnings articles to see how these companies finally fared.

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