Nasdaq (NDAQ) to Report Q3 Earnings: What's in the Cards?

Nasdaq, Inc. NDAQ is slated to report third-quarter 2020 results on Oct 21, before market open. In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 6.2%, led by growth in Market Services segment and non-trading revenues.

Factors to Consider

Nasdaq’s third-quarter performance is likely to have benefited from growth of Investment Data & Analytics business, higher listing business and lower interest expenses.

Nasdaq’s third-quarter results are expected to reflect growth in eVestment. The acquisition of Solovis is likely to have provided additional opportunities to expand solutions and usage for eVestment customers.

Non-trading revenues are expected to have benefited from better performance of Market Technology, and continued strong growth of Index and Investment Data & Analytics businesses.

Market Technology and Information Services businesses provide the biggest growth opportunities. Revenues in this segment are likely to have benefited from organic growth, increase in Software-as-a-Service surveillance revenues. However, this upside is likely to have been weighed down by short term, logistical growth challenges, which increase the risk of Market Technology.

In the third quarter, majority of the revenues in the Information Services segment came from the index licensing and investment in analytics products, owing to investments in expanding capabilities in higher growth areas within Information Services.

Index revenues are expected to have benefited from increase in Exchange Traded Product (ETP) licensed product Assets Under Management (AUM) and from fees generated from trading of licensed futures.

The Zacks Consensus Estimate for Marketing Technology revenues is pegged at $88 million, indicating an increase of 4.8% from the year-ago reported figure.

Nasdaq reported mixed volumes for third-quarter 2020. While U.S. equity options volume increased 52% year over year to 660 million contracts, European options and futures volume declined 22.4% year over year to 16.9 million contracts.

Revenues per contract for U.S. equity options declined 20% to 12 cents, while the same for European options and futures increased 23% to 48 cents.

Under its cash equities, Nasdaq’s U.S. matched equity volume in the third quarter grossed 123.6 billion shares, up 37% from the prior-year quarter’s levels. European equity volume increased 23.4% year over $237 billion.

Under Fixed Income and Commodities, U.S. Fixed income volume in third quarter declined 60% to $1.2 trillion. European fixed income volume decreased 15.9% to 5.8 million contracts.

Higher listings are expected to have aided revenues. In the third quarter, there were 4,298 listed companies on Nasdaq compared with 4,119 in the year-ago period. Total listings grew 4.3% year over year to 4,298. Nasdaq indexes surged 93.5% to 89.4 million contracts in the third quarter.

The current economic and political backdrop are likely to have supported cash equities and equity linked derivatives volumes in the to-be-reported quarter.

The Zacks Consensus Estimate for listing services revenues is pegged at $75 million, indicating 1.3% increase from the year-ago period reported figure.

Interest expenses are likely to have decreased due to refinancing of senior notes in March 2020 with the 2030 Notes at a lower interest rate as well as the repayment of senior unsecured floating rate notes in March 2019 with commercial paper issuances and cash on hand.

The Zacks Consensus Estimate for earnings is pegged at $1.45, indicating 14.1% increase from the year-ago period reported figure.

Earnings Surprise History

The company boasts an attractive earnings surprise history, having surpassed estimates in each of the trailing four quarters, the surprise being 4.05%, on average. This is depicted in the chart below:

Nasdaq, Inc. Price and EPS Surprise

  Nasdaq, Inc. Price and EPS Surprise

Nasdaq, Inc. price-eps-surprise | Nasdaq, Inc. Quote

What Our Quantitative Model States  

Our proven model predicts an earnings beat for Nasdaq this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: Nasdaq has an Earnings ESP of +0.32%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Nasdaq currently carries a Zacks Rank #3.

Other Stocks to Consider

Here are some stocks from the finance sector also with the perfect combination of elements to surpass estimates in their upcoming releases.

Cardtronics PLC CATM has an Earnings ESP of +56.78% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Envestnet, Inc. ENV has an Earnings ESP of +2.35% and a Zacks Rank #2.

Evertec, Inc. EVTC has an Earnings ESP of +1.90% and a Zacks Rank of 3.

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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.

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