Will NASDAQ Stock Beat Q1 Earnings Estimates, Thanks to Higher Trading Volumes?

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NASDAQ (NASDAQ: NDAQ) It is scheduled to release its first quarter 2021 results on Wednesday, April 21. We expect the NASDAQ to beat consensus estimates for earnings as earnings are likely to miss expectations. The stock market has managed to outperform revenue and profit estimates in each of the past two quarters. The company posted a strong performance in 2020, with higher trading volumes in the US driving market services revenue in each of the four quarters of the year – the segment contributed 38% to net revenue (total revenue minus transaction discounts and foreign exchange fees) based on 2020 data. In addition, its non-commercial revenue also grew organically during the year, led by a 17% year-over-year jump in the information services segment – 31% of net revenue. We expect the same trend to fuel the results for the first quarter of fiscal 2021 as well.

Our forecast indicates that The valuation of the NASDAQ is around $ 158 per share, which is slightly lower than the current market price of around $ 160. Watch our interactive dashboard analysis at NASDAQ pre-earnings: what to expect in the first quarter? for more details.

(1) Net sales expected ahead of consensus estimates in Q1

Trefis estimates NASDAQ’s first quarter FY2021 net income to be around $ 821 million, slightly above the consensus estimate of $ 809 million. NASDAQ’s total revenues of $ 5.6 billion for the year 2020 were 32% higher than the 2019 figure. That translated into net revenues of $ 2.9 billion, up 15% year-on-year annually, due to higher transaction discounts and foreign exchange fees as a percentage of revenue. The growth in net revenue could be attributed to two factors: First, a 21% year-over-year jump in the market services segment from the 3% CAGR in 2016-2019, mainly due to higher volumes of trading that benefited trading and clearing income; second, a 17% year-over-year increase in the information services segment due to revenue growth from market data, indexes and analytics. We expect the same momentum to continue in the first quarter of fiscal 2021.

While non-trade income is likely to continue its positive growth path, income from market services is expected to suffer as unusually higher trading volumes in the United States normalize in the following quarters, with improving economic conditions. . Overall, this will reduce NDAQ revenue slightly to around $ 5.5 billion in FY2021. Our dashboard on NASDAQ revenues offers more details on the business segments.

2) BPA risks missing consensus estimates

NASDAQ’s first quarter 2021 adjusted earnings per share (EPS) is expected to be $ 1.57 by Trefis analysis, nearly 9% below the consensus estimate of $ 1.72. The company’s net income increased 21% year-on-year to $ 933 million in 2020. It was driven by positive revenue growth and lower operating expenses as a percentage of revenue. net business from 59.9% to 57.5%. This improved the EPS figure from $ 4.63 to $ 5.59. We expect the same trend to continue in the first quarter of fiscal 2021 results.

NASDAQ revenue is expected to decline slightly in FY 2021. In addition, the net profit margin is expected to remain close to the 2020 level. Overall, this will allow the NDAQ to report EPS of around 5. $ 36 for the current year.

(3) Estimate of the share price largely around the current market price

Through our The valuation of the NASDAQ, with an EPS estimate of around $ 5.36 and a multiple of P / E just below 30x in fiscal 2021, that translates to a price of $ 158, which is slightly lower than the price current market of about $ 160.

Note: P / E multiples are based on the stock price at the end of the year and the reported (or expected) adjusted profit for the full year

While NASDAQ stock is trading near its fair value, 2020 has created many price discontinuities that can provide some interesting trading opportunities. For example, you will be surprised at how the valuation of stocks for Southern Copper vs. Tempur Sealy International shows a disconnect with their relative operational growth. You can find a lot of them discontinuous pairs here.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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