Is a Beat in Store for Nasdaq (NDAQ) this Earnings Season?

We expect Nasdaq, Inc.NDAQ to beat earnings expectations when it reports its fourth-quarter and full-year 2016 results on Jan 31.

Why a Likely Positive Surprise?

Our proven model shows that Nasdaq has the right combination of two key ingredients to beat earnings.

Positive Zacks ESP : Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is pegged at +1.06%. This is a major indicator of a likely positive earnings surprise for the company.

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : Nasdaq carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) and 3 have a significantly higher chance of beating earnings.

The combination of Nasdaq's Zacks Rank #3 and ESP of +1.06% makes us confident of an earnings beat on Jan 31. Notably, the Zacks Consensus Estimate of 94 cents reflects a year-over-year increase of 5.8%.

Factors to Influence Q4 Results

Nasdaq's quarterly results are likely to get support from its organic growth initiatives as well as strategic acquisitions in the year, including International Securities Exchange, Marketwired and Boardvantage.

Top line should also benefit from the company's consistent focus on its strategy to accelerate its non-transaction revenue base, which includes technology, listing and information revenues. Notably, during third-quarter 2016, the company witnessed 5% organic net revenue growth across the non-trading segments, which provide the bulk of the subscription and recurring revenues, driven by strong growth in technology solutions segment.

Earlier this month, Nasdaq reported trading volumes for fourth-quarter 2016 and provided estimated revenue capture for the quarter. This major exchange operator's U.S. equity options volume surged nearly 49%, year over year, during fourth-quarter 2016. Projected revenue capture per contract (RPC) for the quarter is pegged at 16 cents, flat year over year. European options and futures volume was down 13.5% year over year. Estimated RPC reflects a 9.5% year-over-year increase to 46 cents.

Among others, Nasdaq's U.S. matched shares declined 7% from the prior-year period. Estimated revenue capture per 1,000 shares reflects a decline of 7.5%, on a year-over-year basis, to 49 cents. The U.S. Fixed income volume for the quarter was up 3%, while European fixed-income volume climbed 15.2%.

Overall the quarterly trading volume report reflected a mixed performance, while the strengthening of the U.S. dollar is likely to have weighed on the European operations to some extent.

Regarding expenses, Nasdaq had narrowed its 2016 operating expense guidance to a range of $1.22-$1.24 billion. However, for fourth-quarter 2016, the company projected operating expenses in the range of $323-$343 million, reflecting a sequential rise.

Notably, Nasdaq has reported a positive earnings surprise, with an average beat of 1.4% for the trailing four quarters.

Nasdaq, Inc. Price and EPS Surprise

Nasdaq, Inc. Price and EPS Surprise | Nasdaq, Inc. Quote

Stocks That Warrant a Look

Here are some stocks worth considering, as they have the right combination of elements to post an earnings beat this quarter.

MasterCard Inc. MA is scheduled to release results on Jan 31. It has an Earnings ESP of +3.53% and carries a Zacks Rank #3.

CME Group Inc. CME is slated to release results on Feb 2. It has an Earnings ESP of +1.85% and carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

CBOE Holdings, Inc. CBOE has an Earnings ESP of +3.45% and sports a Zacks Rank #1. The company is slated to release results on Feb 6.

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Mastercard Incorporated (MA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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