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Nasdaq beats on Q2 revenues and earnings

Nasdaq, an operator of a global stock exchange, issued solid financials for the second quarter of 2016. Net revenues increased 7.9% y-o-y to a record $559 mn, surpassing consensus estimate of $545 mn. Segment-wise, revenues at Market Services grew 2.6% to $194 mn. Revenues from Listing Services climbed 3% to $68 mn, while Information Services’ revenues rose 4.7% to $134 mn. Technology Solutions generated revenues of $163 mn, up 20.7% y-o-y. Total order value (the value of orders signed but not recognized as revenues) increased 8.6% to $769 mn. New listings totaled 106, which included 50 IPOs. Adjusted operating income grew 9.3% to $259 mn, and operating margin expanded 60 basis points to 46.3%. Adjusted earnings per share improved 9.6% to 91 cents beating analysts’ average projection by 3 cents.

Nasdaq repurchased 256,808 shares for $16 mn in the second quarter, and additional 127,580 shares for $8 mn in the third quarter through July 26. As of July 26, there was $476 mn remaining under the company’s authorized share buyback program. A quarterly dividend was 32 cents per share, which offers a healthy annualized dividend yield of 1.8%.

During Q2, Nasdaq completed the acquisition of International Securities Exchange, or ISE, which operates three electronic US options exchanges, and Boardvantage, a leading board portal solution provider specializing in leadership collaboration and meeting productivity. The company has achieved approximately USD 10 mn in annualized run-rate cost synergies. To remind, earlier this year, Nasdaq acquired Chi-X Canada, an alternative trading system for Toronto Stock Exchange, and Marketwired – a leading global provider of news distribution services and analytics for communications professionals.

I believe that M&A deals combined with robust operational activities and disciplined expense control will strengthen the company’s growth profile and allow it to continue to deliver strong results going forward.

I expect Nasdaq’s shares to continue to rise, with medium-term target at $78.