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MarketAxess: A Strong Sell - Analyst Blog

On Jun 5, 2014, Zacks Investment Research downgraded MarketAxess Holdings Inc. ( MKTX ) 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 quarters.

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 12.3%.

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 momentum.

Other Worthy Financial Stocks

While we prefer to avoid MarketAxess for the time being, better-ranked financial stocks like Ladder Capital Corp. ( LADR ), Xoom Corp. ( XOOM ) and HCI Group Inc. ( HCI ) are worth considering. All these stocks sport a Zacks Rank #1 (Strong Buy).

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MARKETAXESS HLD (MKTX): Free Stock Analysis Report

HCI GROUP INC (HCI): Free Stock Analysis Report

XOOM CORP (XOOM): Free Stock Analysis Report

LADDER CAP CP-A (LADR): Free Stock Analysis Report

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Zacks Investment Research

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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