MarketAxess: A Strong Sell - Analyst Blog

On Jun 5, 2014, Zacks Investment Research downgraded MarketAxess Holdings Inc. MKTX by a notch to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

MarketAxess has been witnessing downward estimate revisions due to a sluggish growth outlook, given the lack of any significant growth catalyst and intense competition. This escalates operational and financial risks. Volumes for May 2014 also sapped within the U.S. high-grade fixed-rate securities, which accounts for more than half of the total volumes.

Additionally, this fixed-income securities exchange underperformed the one-year Nasdaq index, which posed growth of 23% against 19.6% clocked by the company. Furthermore, the company failed to deliver any positive earnings surprise in 2 of the last 4 quarters.

On Apr 23, MarketAxess reported first-quarter 2014 operating earnings per share of 46 cents, which was in line with the Zacks Consensus Estimate but higher than the prior-year figure by 12.3%.

While the top line grew 18.1%, total expenses rose 23.1%, both on a year-over-year basis. As a result, operating margin deteriorated to 43.7% from 46% in the year-ago quarter. Reduction was also witnessed in credit spreads and yields during the quarter. Moreover, average variable transaction fee per million was lower than the comparable period.  A weakened cash and balance sheet position were other headwinds.

Meanwhile, the Zacks Consensus Estimate for 2014 and 2015 declined 3.1% and 4.1% to $1.87 and $2.36 a share, respectively, in the last 30 days. No upward revision in estimates was witnessed for both these years, which further reflects a slow growth momentum.

Other Worthy Financial Stocks

While we prefer to avoid MarketAxess for the time being, better-ranked financial stocks like Ladder Capital Corp. LADR, Xoom Corp. XOOM and HCI Group Inc. HCI are worth considering. All these stocks sport a Zacks Rank #1 (Strong Buy).


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
MARKETAXESS HLD MKTX: Free Stock Analysis Report
 
HCI GROUP INC HCI: Free Stock Analysis Report
 
XOOM CORP XOOM: Free Stock Analysis Report
 
LADDER CAP CP-A LADR: Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research
Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!