Everyone's Talking About Nasdaq's New Trading Numbers, And It's Not Great
At least three Wall Street analysts have cut their first-quarter earnings view on Nasdaq Inc (NASDAQ: NDAQ) on choppier market environment, and the new estimates are below the consensus EPS view of $0.92 a share.
Barclays analyst Kenneth Hill trimmed first-quarter profit forecast to $0.86 a share from $0.91 a share, saying, "Roughly three of the five cent reduction is coming from softer 1Q expectations across listings, index and licensing services, and market tech, though some of the 1Q shortfall we expect to reverse in the second half of the year. On the transaction side, pricing trends in cash equities are reducing our EPS estimate by two cents for the quarter."
"Based on March metrics and our 1Q true-up we are reducing our EPS by $0.06 in 2016 (to $3.77) and our price target moves to $70 from $71 (applying the same 18.5x to our 2016 EPS)," added Hill.
The analyst maintained the Overweight rating on Nasdaq shares, and said, "We continue to like the story at NDAQ but believe the next few quarters could be bumpier than we have become accustomed to given the integration efforts and choppier market environment."
Meanwhile, Ashley Serrao of Credit Suisse slashed first-quarter earnings view of Nasdaq to $0.88 from $0.90 and full year EPS estimate to $3.70 from $3.71 on "short-term negative mix shift in cash equities and softer listing environment."
"We note that equity capture trends improved through the quarter and we expect capture to trend higher in 2Q," Serrao noted.
The analyst maintained Outperform rating and $68 price target on NDAQ shares on "underappreciated" growth opportunities, FCF generation, "opportunistic buybacks and M&A."
"With that said, we believe there-rating component of our thesis has largely played out, and improvement from here will rely on driving recurring revenues even higher (towards 80% of revenues) and demonstrating stronger than expected organic growth," the analyst added.
In addition, Raymond James too reduced its first-quarter earnings estimate for Nasdaq. The brokerage now expects earnings of $0.82 a share, down from earlier estimate of $0.91 a share. It also slashed the price target on NDAQ shares by $3 to $67.
"The picture wasn't quite as rosy for Nasdaq, however, which saw market share compression in U.S. equities, U.S. options, Nordic equities, and eSpeed," analyst Patrick O'Shaughnessy wrote in a note.
"Industry-wide trading volume across Nasdaq's key products was robust in 1Q16, particularly in U.S. equities where average daily volume (ADV) was up 21 percent q/q. That said, volumes generally declined as the quarter progressed and market volatility subsided," the analyst noted.
The analyst highlighted, "Nasdaq's March U.S. equities market share of 17.0 percent was the firm's lowest as a publicly-traded company. Also not helpful was the firm's revenue capture: although flat to slightly up in most products, Nasdaq saw a large drop in U.S. equities revenue capture as its trading volumes mix shifted in favor of intraday volumes, which have lower pricing compared to open and close volumes."
Although O'Shaughnessy maintained his Outperform rating, he noted, "While we expect the current market environment to foster healthy industry-wide volumes across asset classes to drive incremental revenue growth, Nasdaq's ability to monetize elevated market volatility during 1Q16 fell below our expectations."
Shares of Nasdaq have fallen roughly 3 percent on the day, recently seen trading at $62.56.
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|Nov 2016||Credit Suisse||Assumes||Outperform|
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