NASDAQ Stock To Edge Past The Consensus In Q1?

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NASDAQ (NASDAQ: NDAQ) is scheduled to report its fiscal Q1 2022 results on Wednesday, April 20, 2022. We expect NASDAQ to edge past the consensus estimates for revenues and earnings. The exchange reported better than expected results in each of the last four quarters. Its net revenues (total revenues minus transaction-based expenses) of $885 million in Q4 were 12% more than the year-ago period. It was driven by a 19% y-o-y rise in the solutions segment revenues, followed by a 5% growth in the market services unit. Notably, the solutions segment includes revenues from market technology, investment intelligence (information services), and corporate platforms (corporate services) divisions. Overall, the increase in the top line was partly due to organic growth and partly due to acquisitions and divestitures. We expect the same trend to continue in the first-quarter results.

Our forecast indicates that NASDAQ’s valuation is $212 per share, which is 19% above the current market price of around $179. Our interactive dashboard analysis on NASDAQ’s Earnings Preview has more details. 

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(1) Revenues expected to remain slightly above the consensus estimates

Although NASDAQ’s revenues for full-year 2021 grew 5% y-o-y to $5.9 billion, it translated into net revenues of $3.4 billion – up 18% y-o-y. It was primarily driven by a favorable drop in the transaction-based expenses as a % of total revenues from 48.4% to 41.9%. 

  • The market services segment grew 13% y-o-y to $1.2 billion and contributed 36% of the net revenues in 2021. While the higher trading volumes witnessed in 2020, continued in 2021 as well, the growth was primarily driven by lower transaction-based expenses. We expect the first-quarter results to be on similar lines.
  • The non-trading revenues increased 21% y-o-y to $2.2 billion in 2021. It was mainly driven by a 20% growth in the investment intelligence unit, mainly due to higher index revenues. Further, the market technology revenues rose 30%, followed by an 18% growth in the corporate platforms unit. We expect the non-trading revenues to continue their growth momentum in the first quarter.
  • Overall, we expect NASDAQ’s total revenues to remain around $6 billion for full-year FY2022.

Trefis estimates NASDAQ’s fiscal Q1 2022 net revenues to be around $902 million, marginally above the $891 million consensus estimate. We expect the growth in non-trading revenues to drive the first-quarter results.

Going forward, we expect the non-trading income to drive growth for the company, while the trading revenues will likely normalize with the recovery in the economy. Our dashboard on NASDAQ’s revenues offers more details on the company’s operating segments along with our forecast for FY2022.

2) EPS is likely to edge past the consensus estimates

NASDAQ Q1 2022 adjusted earnings per share (EPS) is expected to be $1.98 per Trefis analysis, almost 2% above the consensus estimate of $1.94. The exchange reported a 27% y-o-y rise in the adjusted net income to $1.2 billion in 2021. It was partly due to revenue growth and partly due to gain on the sale of investment security, partially offset by a slight increase in operating expenses. We expect the first-quarter earnings to be on similar lines as the last quarter. All in all, NASDAQ is likely to report an annual EPS of $6.65 for full-year 2022. 

(3) Stock price estimate 19% above the current market price

We arrive at NASDAQ’s valuation, using an EPS estimate of around $6.65 and a P/E multiple of just below 32x in fiscal 2021. This translates into a price of $212, which is 19% more than the current market price of close to $179. 

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year 

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 Returns Apr 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 NDAQ Return 0% -15% 166%
 S&P 500 Return -2% -7% 99%
 Trefis Multi-Strategy Portfolio -1% -9% 259%

[1] Month-to-date and year-to-date as of 4/18/2022
[2] Cumulative total returns since the end of 2016

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