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MarketAxess (MKTX) Lags Q1 Earnings, Revenue Estimates

MarketAxess Holdings Inc. MKTX reported its first-quarter 2016 record operating net income of 77 cents per share, which missed the Zacks Consensus Estimate by 3.8%. However, the earnings improved 18.5% from the year-ago quarter.

The bottom-line growth was primarily driven by a strong top-line performance. The company witnessed continued strong growth owing to the acceleration of market share gains across core products and healthier U.S. market volumes resulting in record trading volumes.

Operational Update

MarketAxess’ record total revenues came in at $88.6 million, up 15.4% year over year. However, revenues missed the Zacks Consensus Estimate by of $90 million. The top-line improvement can be attributed to higher commission revenues (up 18.0% year over year) as well as investment income (surged 128.4%).

Total expenses of MarketAxess increased 15.5% year over year to 44.2 million. The increase in expenses stemmed from higher employee compensation and benefits costs, clearing costs, professional and consulting fees and marketing expenses.

Total trading volume of MarketAxess increased 27.2% year over year to a record $310.0 billion.

Financial Update

MarketAxess exited the first quarter with total assets of $451.8 million, up 2.9% from year-end 2015.

Total cash and cash equivalents of $137.9 million as of Mar 31, 2016 plunged 30.9% from year-end 2015.

At the end of the reported quarter, MarketAxess had total stockholder’s equity of $410.4 million, up 5% year over year.

Dividend and Share Repurchase Update

The board of directors of MarketAxess declared a quarterly cash dividend of 26 cents per share. The dividend will be paid on May 26, 2016 to stockholders on record as of the close of business on May 12, 2016.

In the first quarter, the company bought back shares worth $1.2 million. As of Mar 31, 2016, the company is left with $23.8 million available for buybacks.

Guidance Reiterated

MarketAxess projects its full year-2016 expense in the range of $168–$176 million and capital spending in the range of $18–$22 million. The overall effective tax rate is anticipated to be in between 34–36%.

Zacks Rank and Other Stocks

MarketAxess Holdings currently carries a Zacks Rank #3 (Hold). While the bottom-line at Nasdaq Inc. NDAQ beat the Zacks Consensus Estimate, CME Group CME met the same in the first quarter. CBOE Holdings, Inc. CBOE is scheduled to release its first-quarter results on Apr 29.

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