Will the recent positive trend continue leading up to its next earnings release, or is Nasdaq 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 catalysts.
Nasdaq Surpasses Q2 Earnings & Revenue Estimates
Nasdaq reported second-quarter 2021 adjusted earnings per share of $1.90, beating the Zacks Consensus Estimate of $1.73 by 9.8%. The bottom line increased 23.4% year over year.
The improvement was primarily driven by organic growth, favorable changes in foreign exchange rates, margin expansion and solid segmental performance. Nasdaq noted that the solid results reflect strength of its diverse offerings and scalability of increasingly SaaS-oriented business model.
Performance in Detail
Nasdaq’s revenues of $846 million increased 21% year over year. The upside was primarily attributable to a $104 million impact from organic growth, a $27 million increase from the inclusion of revenues from the acquisition of Verafin, and a $16 million increase from the impact of favorable changes in FX rates. The top line beat the Zacks Consensus Estimate by 2.7%.
Adjusted operating expenses were $392 million, up 20% from the year-ago period owing to a $24 million organic increase, a $26 million impact of the Verafin acquisition and a $15 million increase from changes in FX rates.
Operating margin of 54% expanded 100 basis points year over year.
Nasdaq witnessed 135 IPOs in the second quarter, representing $32 billion in capital raised, including 88 operating company IPOs and 47 IPOs of special purpose acquisition companies. In the reported quarter, the Nasdaq welcomed 264 new listings.
Net revenues at Market Services were up 13% from the year-ago quarter to $312 million. This upside was largely due to higher revenues from equity derivative trading and clearing, cash equity trading, fixed income and commodities trading and clearing, and trade management services.
Revenues at Corporate Services increased 22% year over year to $154 million, driven by higher listings services revenues as well as IR & ESG revenues.
Investment Intelligence revenues rose 23% year over year to $263 million. Higher market data, index and analytics revenues drove the upside.
Revenues at Market Technology increased 39% year over year to $117 million, largely due to higher revenues at marketplace infrastructure technology as well as anti-financial crime technology.
Nasdaq had cash and cash equivalents of $430 million as of Jun 30, 2021, down from $2.8 billion at 2020-end level. Long-term debt decreased 1.1% from 2020-end level to $5.5 billion as of Jun 30, 2021.
Nasdaq returned $579 million in the first half of 2021, including $410 million in share repurchases and $169 million in dividends.
As of Jun 30, 2021, Nasdaq had $1.459 billion remaining under its share repurchase authorization.
Nasdaq provided 2021 non-GAAP operating expense guidance in the range of $1.59 billion to $1.62 billion.
Non-GAAP tax rate is still estimated to be in the range of 25% to 27% in 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
At this time, Nasdaq has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren’t focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Nasdaq has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.