On Jun 5, 2014, Zacks Investment Research downgraded
MarketAxess Holdings Inc.
) 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
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
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
Other Worthy Financial Stocks
While we prefer to avoid MarketAxess for the time being,
better-ranked financial stocks like
Ladder Capital Corp.
HCI Group Inc.
) are worth considering. All these stocks sport a Zacks Rank #1
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MARKETAXESS HLD (MKTX): Free Stock Analysis
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