MarketAxess (MKTX) Stock Gains 11% on Q4 Earnings Beat

Shares of MarketAxess Holdings Inc.MKTX gained a solid 11.1% in a day's trading following its fourth-quarter 2016 earnings release on Wednesday. The company reported earnings per share of 88 cents, beating the Zacks Consensus Estimate of 83 cents. Also, the bottom line improved 35.4% from the year-ago quarter.

Results of the New York-based operator of fixed-income securities trading platforms were primarily driven by a robust top-line performance.

The company witnessed quarterly average daily volume records in the U.S. high-grade, emerging markets and Eurobonds. Management noted in its earnings call conference, "This is an extraordinary outcome given the normal seasonal factors impacting the quarter, a combination of strong market volume growth post the U.S. elections and continued gains in market share contributed to the results."

Net income for the quarter was $33.2 million, surging 35.4% year over year.

For full-year 2016, earnings per share of $3.34 outpaced the Zacks Consensus Estimate of $3.30. In addition, it improved from the prior-year figure of $2.55. Net income for 2016 was $126.2 million, up 31.4% from the prior year.

Higher Trading Volume Drives Revenues

Revenues for 2016 came in at $369.9 million, up 22% year over year. The figure also came slightly above the Zacks Consensus Estimate of $369 million.

For fourth-quarter 2016, MarketAxess posted total revenue of $94.4 million, surpassing the Zacks Consensus Estimate of $93.6 million. Revenues also climbed 23.2% year over year.

The top-line improvement can be primarily attributed to 26.5% growth in commission revenues.

However, other revenues consisting of information and post-trade services, technology products and services, investment income and other revenue, edged down 1.1% year over year to $8.9 million. The decline was mainly due to an unfavorable impact of $2.7 million stemming from a stronger U.S. dollar offset by higher data revenue.

Total trading volume jumped 35.1% in the reported quarter year over year to a $338.3 billion.

Total expense of MarketAxess increased 11.2% year over year to $44.1 million. The rise was increase in employee compensation and benefits costs, technology and communications, professional and consulting fees, marketing and advertising, and general and administrative expenses.

Financial Update

As of Dec 31, 2016, total assets were $528.0 million, up 20.3% from year-end 2015.

Total cash, cash equivalents and investment of $362.6 million as of Dec 31, 2016, advanced 27.5% from year-end 2015. Total stockholder's equity was $468.0 million, up from $390.7 million in the prior year.

Dividend Hike

The board of directors of MarketAxess announced a 27% hike in quarterly cash dividend to 33 cents per share. The dividend will be paid on Feb 23 to stockholders on record at the close of business on Feb 9, 2017.

Share Repurchase Update

During the reported quarter, MarketAxess repurchased 62,800 shares for $10.1 million. As of Dec 31, 2016, shares of about $51.1 million were available for repurchases under its existing program.

Outlook 2017

For 2017, the company expects total expenses in the range of $192-$208 million and its capital expenditures in the range of $25- $30 million. Overall effective tax rate for the year is estimated between 32% and 34%.

Our Take

MarketAxess' results highlight a decent performance. The company should continue to benefit from its international business with strength in both emerging markets and Eurobond spaces. Further, the company remains well positioned for growth, with consistent momentum in open trading and increasing global credit footprint. However, escalating costs and stiff competition remain key concerns.

MarketAxess Holdings, Inc. Price, Consensus and EPS Surprise

MarketAxess Holdings, Inc. Price, Consensus and EPS Surprise | MarketAxess Holdings, Inc. Quote

MarketAxess currently flaunts a Zacks Rank #1 (Strong Buy).You can see the complete list of today's Zacks #1 Rank stocks here .

Among other firms in the finance space, Ally Financial Inc. ALLY and Credit Acceptance Corp. CACC are slated to release results on Jan 31, while Regional Management Corp. RM is scheduled to release on Feb 7.

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Credit Acceptance Corporation (CACC): Free Stock Analysis Report

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MarketAxess Holdings, Inc. (MKTX): Free Stock Analysis Report

Regional Management Corp. (RM): 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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