Nasdaq (NASDAQ: NDAQ) is scheduled to report its fiscal Q3 2022 results on Wednesday, October 19, 2022. We expect Nasdaq to beat the consensus estimates for revenues and earnings. The exchange reported better-than-expected results in the last quarter, with the net revenues (total revenues minus transaction-based expenses) increasing 6% y-o-y to $893 million. The growth was because of a 10% increase in the solutions segment (non-trading revenues), followed by a marginal rise in the market services unit (trading revenues). Notably, the solutions segment includes market technology, investment intelligence, and corporate platforms sub-segments. We expect the solutions segment to continue its growth trajectory in Q3. Further, the market services revenues are likely to improve due to higher quarterly volumes in equity derivatives and cash equities.
Our forecast indicates that Nasdaq’s valuation is $67 per share, which is 22% above the current market price of around $55. 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
Nasdaq’s revenues improved 1% y-o-y to $3.09 billion in the first half of 2022, translating into net revenues of $1.8 billion – up 5% y-o-y. It was primarily driven by a favorable drop in transaction-based expenses as a % of total revenues and growth in the solutions segment (non-trading revenues).
- Total revenues in the market services segment decreased by 4% y-o-y over the first two quarters of 2022. However, the impact was somewhat reduced due to lower transaction-based expenses. We expect the third-quarter results to be on similar lines.
- The non-trading revenues increased 13% y-o-y to $1.16 billion in the first half of 2022. We expect the same trend to continue in Q3.
- Overall, we estimate Nasdaq’s total revenues to remain around $6.2 billion for the full-year FY2022.
Trefis estimates Nasdaq’s fiscal Q3 2022 net revenues to be around $897 million, 1% above the $887 million consensus estimate.
2) EPS is likely to beat the consensus estimates
Nasdaq Q3 2022 adjusted earnings per share (EPS) is expected to be $0.66 per Trefis analysis, just above the consensus estimate of $0.65. The exchange reported an 8% y-o-y drop in the adjusted net income to $590 million in the first half of 2022, despite positive growth in the top line and lower expenses as a % of revenues. It was due to a net gain of $84 million on the divestiture of business and higher net income from unconsolidated investees in the year-ago period. Markedly, unconsolidated investees include income recognized from equity method investment in options clearing corporation (OCC). We expect the third-quarter earnings to follow the same trend as Q2. Altogether, Nasdaq is likely to report an annual GAAP EPS of $2.28 for the full-year 2022.
Note – The stock underwent a three-for-one split on August 29, 2022.
(3) Stock price estimate is 22% above the current market price
We arrive at NASDAQ’s valuation, using an EPS estimate of around $2.28 and a P/E multiple of just above 29x in fiscal 2022. This translates into a price of $67, which is 22% more than the current market price of close to $55.
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
|S&P 500 Return||0%||-25%||60%|
|Trefis Multi-Strategy Portfolio||-2%||-28%||187%|
 Month-to-date and year-to-date as of 10/17/2022
 Cumulative total returns since the end of 2016