Exchange operator Nasdaq (NDAQ) will report first quarter fiscal 2019 earnings results before Wednesday’s opening bell. What is it going to take to get the stock moving inline with its execution?
Although the company has witnessed solid growth across all business segments, while diligently managing expenses (down 3% in Q4), NDAQ stock has risen just 5% over the past year, trailing the 10% rise in the S&P 500 index. This is even though the company, given its growth in its market services unit which oversees transactions, clearing, and settlements, has delivered nine straight quarters of earnings beats.
What’s more, the company is now positioning itself for long-term revenue growth and better diversification as evidenced by its bid to acquire Norwegian peer Oslo Bors VPS. With existing exchange operations in Sweden, Finland, Denmark and Iceland, Nasdaq — having already won the support of the Oslo Bors board and the two largest shareholders — is well-positioned in the Nordics and seems strongly-suited to be the choice for Norway.
"We remain confident that our offer is the superior solution for the shareholders, members, issuers, investors and employees of Oslo Bors VPS," Nasdaq Chief Executive Officer Adena Friedman said.
All told, the company is backed by investors owning more than 35% of Oslo Bors. This topic, as well as the company’s trading revenue will be worth monitoring on Wednesday. Likewise, although the company is expected to deliver a year-over-year decline in earnings on lower revenues, how the actual results compare to the estimates is certain to influence the stock price in the near-term.
In the three months that ended March, the New York-based company is expected to deliver earnings of $1.17 per share on revenue of $633.55 million. This compares to the year-ago quarter when earnings were $1.24 per share on $666 million in revenue. For the full year, ending in December, earnings are projected to rise 3.3% to $5.00 per share, while full-year revenue of the $2.59 billion would rise 2.6% year over year.
In the last reported quarter, the company delivered strong growth in its three main businesses segments: marketing technology, information services, and corporate services, which drove a net revenue rise of 2.4% year over year to $645 million. The Street was looking for revenue of $642.7 million. Just as impressive were the quality of the revenues, which includes 11% organic revenue growth, which was partially offset by a 7% reduction from the company’s on-going divestitures.
During the quarter, the company realized a $32 million decrease in expenses, thanks to selling off the Public Relations Solutions and Digital Media Services businesses. Fourth quarter adjusted net income rose to $211 million, or $1.26 per share, topping estimates of $1.25 per share. The earnings beat continued to be aided by the company’s diligent cost controls, which resulted in 3% decline in Q4 operating expenses.
On Wednesday analysts will want to see whether these trends can continue in 2019. While Nasdaq has demonstrated a consistent track record of revenue growth, divestment of the Public Relations Solutions and Digital Media Services business will impact revenue in the near term. As such, investors will also focus on the company’s fixed income businesses and options and how it performs with its exchange data products.