Will High Trading Volumes Aid MarketAxess' (MKTX) Q2 Earnings?

MarketAxess Holdings Inc.’s MKTX second-quarter 2020 earnings report is slated for Jul 22. The company is likely to have gained from higher total trading volumes in different categories, such as core products like U.S. high-grade, high-yield, the emerging markets and Eurobonds.

The Zacks Consensus Estimate for the company’s second-quarter earnings is pegged at $7.46 per share, indicating a 38.15% surge from the prior-year reported figure.

The acceleration of trading activity is likely to have resulted in strong financial results as well. The Zacks Consensus Estimate for the company’s second-quarter revenues is pegged at $674.23 million, indicating a 31.85% surge from the prior-year reported figure.

Due to low interest rates, companies must have issued more debt, inducing an increase in high-grade debt in the quarter. The industry players are also likely to have tapped their bank credit lines to improve their liquidity position. Evidently, debt issuance is expected to have grown in both private and public sectors, leading to even greater secondary trading opportunities. The Zacks Consensus Estimate for total U.S High-Grade trading volume is pegged at $344 billion, indicating a 29.64% rise from the year-ago reported figure.

The company is likely to have seen expanded trading volumes in municipal bonds and U.S. treasuries, driven by contribution from LiquidityEdge acquisition.

Trading commission, a key revenue driver of the company, is likely to have risen on the back of increased credit trading volume and inclusion of U.S. treasury trading commission. The Zacks Consensus Estimate for commission stands at $155 billion, suggesting a 36% improvement from the year-ago reported level.

However, the company is likely to have incurred steep operating cost from escalated compensation and benefits, and clearing costs. While the elevation in compensation and benefits might have been due to addition of personnel to support business growth, clearing costs are likely to have shot up by inflated open trading volume and inclusion of matched principal treasury trading volume.

Earnings Surprise History

The company boasts an attractive earnings surprise history. Its bottom line beat estimates in three of the last four quarters (and missed in one), delivering a surprise of 1.09%, on average. This is depicted in the chart below:

MarketAxess Holdings Inc. Price and EPS Surprise

MarketAxess Holdings Inc. price-eps-surprise | MarketAxess Holdings Inc. Quote

Here is what our quantitative model predicts:

Our proven model does not conclusively predict an earnings beat for MarketAxess this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: MarketAxess has an Earnings ESP of 0.00%.

Zacks Rank: MarketAxess currently sports a Zacks Rank of 1.

Stocks to Consider

Some stocks worth considering with the apt combination of elements to surpass estimates this reporting cycle are as follows:

Cboe Global Markets, Inc. CBOE has an Earnings ESP of +0.48% and a Zacks Rank #3, currently.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Global Payments Inc. GPN has an Earnings ESP of +5.86% and a Zacks Rank of 3 at present.

Mastercard Inc MA has an Earnings ESP of +2.52% and is Zacks #3 Ranked.

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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.