Analysts At Wells Fargo Are Increasingly Confident In Nasdaq's Ability To Execute

2Q Results' Analysis: Highs And Lows

Wells Fargo analyst Christopher Harris attributed the better-than-expected second-quarter adjusted earnings per share to higher revenues and lower expense. The revenue upside relative to the firm's estimate came about due to above average organic growth at its tech solutions business.

However, the analyst noted that GAAP results underwhelmed, hurt by acquisition and restructuring charges. Harris also underlined that organic revenue growth was the slowest in about a year.

That said, non-trading organic revenue growth was a standout even as Corporate Solutions business' contribution remains flat.

Nasdaq's Future

The firm sees acceleration in growth, thanks to contributions from a number of projects in development.

Even without these, the firm expects deal integration to support a clear upside. Nasdaq completed the acquisitions of ISE and Boardvantage in the second quarter, preceded by the closure of chi-X Canada and Marketwired deals in the first quarter.

Wells Fargo expects double-digit earnings per share growth in 2016 and 2017.

Analyst Action

Wells Fargo raised its 2016 earnings per share estimate for Nasdaq to $3.72 from $3.69, while the 2017 earnings per share estimate were lifted to $4.22 from $4.20 and the 2018 earnings per share estimate was initiated at $4.55.

Valuation Rationale

Wells Fargo premised its upwardly revised valuation target for Wells Fargo to a 16.5 times multiple on its 2017 earnings per share estimate. The firm believes the shares are fairly valued at current levels.

Full ratings data available on Benzinga Pro.