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Nasdaq (NDAQ) Beats on Q3 Earnings, Tweaks Expense View

Nasdaq, Inc. NDAQ reported third-quarter 2017 adjusted earnings per share of $1.06, beating the Zacks Consensus Estimate of $1.02 by 3.9%. Also, the bottom line improved 16.5% year over year.

Nasdaq, Inc. Price, Consensus and EPS Surprise


Nasdaq, Inc. Price, Consensus and EPS Surprise | Nasdaq, Inc. Quote

Higher revenues as well as growth across the segments — Market Services, Information Services and Market Technology — supported this upside. However, the improvement was limited by an increase in expenses.

On a GAAP basis, the company’s net income jumped 31.2% year over year to $1.01 per share.

Performance in Detail

Nasdaq’s revenues of record $607 million improved 3.8% year over year. Revenues beat the Zacks Consensus Estimate of $599 million, primarily owing to organic growth of $15 million and a $7 million favorable impact on the back of changes in forex rates.
Adjusted operating expenses were $317 million in the reported quarter, remaining unchanged year over year. This represents a decline in organic expense, amounting to $4 million, offset by a $4 million unfavorable impact from changes in forex rates.

Notably, the company increased the lower end of its 2017 non-GAAP operating expense to the range of $1.28-$1.29 billion from $1.26-$1.30 billion, guided earlier.

Segment wise, net revenue at Market Services rose 4.3% from the year-ago quarter to $581 million. This upside was driven by improved revenues from European cash equities, higher volumes and pricing changes at NFX, increased customer demand for third-party connectivity, co-location and test facilities as well as a favorable impact from changes in forex rates.

Revenues at Corporate Services slipped 0.6% year over year to $161 million. This was mainly due to a decline in in U.S. listings revenues due to the run-off of listing of additional shares fees, driven by implementation of the company’s all-inclusive annual fee. An increase in European listing services revenues partially offset the downside.

Information Services revenues rose 9.5% year over year to $150 million. Higher shared tape plan revenues and audit collections, as well as higher assets under management in exchange traded products linked to Nasdaq indexes, drove the upside.

Revenues at Market Technology increased 5.5% year over year to $77 million due to higher change request revenues, along with organic revenue growth in software as a service revenue and a positive impact due to changes in forex rates. However, lower software, licensing and support revenues partially offset the upside. Market Technology order intake totaled $66 million. The Nasdaq Stock Market witnessed 78 new listings during the third quarter, 34 of which were IPOs.

Financial Update

Nasdaq had cash and cash equivalents of $530 million as of Sep 30, 2017, up 31.5% from 2016-end level. As of Sep 30, 2017, debt dipped 0.4% over 2016-end level to $3.59 billion.

Dividend and Share Repurchase Update

The board of directors approved 38 cents per share quarterly dividend, which will be paid on Dec 29, 2017 to shareholders of record on Dec 15, 2017.

During the third quarter, the company bought back shares worth $18 million. As of Sep 30, 2017, the company had $255 million remaining under its buyback authorization.

Our Take

Nasdaq’s results reflect a decent performance. Growth looks encouraging as the company remains focused on expansion through acquisitions and organic initiatives that enable entry and open up cross-selling opportunities into new markets. The top line should also benefit from the company’s consistent focus on its strategy to accelerate non-transaction revenue base, including technology, listing and information revenues.

Zacks Rank

Nasdaq carries a Zacks Rank #3 (Hold). You can see _1link">the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Companies from the Finance Sector

Among other players from the finance sector that have reported third-quarter earnings so far, the bottom line at American Express Company AXP, The Travelers Companies, Inc. TRV and Discover Financial Services DFS beat their respective Zacks Consensus Estimate.

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