Nasdaq's (NDAQ) Q4 Earnings Coming Up: What's in Store?

Zacks Equity Research
·5 min read

Nasdaq NDAQ is slated to report fourth-quarter 2020 results on Jan 27, before market open. The company delivered an earnings surprise in the three reported quarters of 2020.

Factors to Consider

Nasdaq’s fourth-quarter performance is likely to have benefited from its diversified product offerings and business model.

Information Service is expected to have benefited from growth in Index business as well as contributions from the investment data & analytics and market data businesses.

Non-trading revenues are expected to have been aided by better performance of Market Technology, and continued strong growth of Index and Investment Data & Analytics businesses. Nasdaq estimates to achieve the low end of its 5-7% long-term growth outlook for non-trading segment revenues in 2020. The Zacks Consensus Estimate for Investment Data & Analytics businesses revenues is pegged at $45.5 million, indicating 10.9% increase from the year-ago period reported figure. The consensus estimate for Index revenues is pegged at $89 million, a 56.1% increase from the year-ago period reported figure.

Market Technology and Information Services businesses provide the biggest growth opportunities. Revenues in this segment are likely to have been driven by organic growth and increase in Software-as-a-Service surveillance revenues.  The Zacks Consensus Estimate for Marketing Technology revenues is pegged at $95 million.

Information Services segment is expected to have benefited from index licensing and investment in analytics products, owing to investments in expanding capabilities in higher growth areas within Information Services.

Nasdaq reported mixed volumes for fourth-quarter 2020. While U.S. equity options volume increased 70.7% year over year to 741 million contracts, European options and futures volume dropped 29.8% year over year to 17.4 million contracts.

Though revenues per contract for U.S. equity options dropped 21.4% to 11 cents, the same for European options and futures improved 40% to 56 cents.

Under its cash equities, Nasdaq’s U.S. matched equity volume in the fourth quarter grossed 115.4 billion shares, up 45.2% from the prior-year quarter. European equity volume increased 39.1% year over $281 billion.

Under fixed income commodities, U.S. fixed income volumes traded were $1.7 trillion, down 0.6%. European fixed income volume decreased 7.7% to 6 million contracts.

In the fourth quarter, there were 4,051 listed companies on Nasdaq compared with 3,768 in the year-ago period. Total listings grew 6.8% year over year to 4,119. Higher listing revenues are likely have aided the Corporate Services segment. The Zacks Consensus Estimate for listing services revenues is pegged at $80 million, indicating 3.9% increase from the year-ago period reported figure.

Nasdaq estimates 2020 non-GAAP operating expense in the range of $1.36 billion to $1.37 billion, up from $1.33 billion to $1.36 billion guided earlier, given organic increase in expenses and unfavorable changes in foreign exchange rates. It now estimates the high end to increase by $45 million including $20 million increase in performance-linked compensation and other variable expenses and $25 million for costs from single customer implementation project.  

The Zacks Consensus Estimate for earnings is pegged at $1.47, indicating about 14% increase from the year-ago period reported figure.

What Our Quantitative Model States 

Our proven model does not conclusively predict an earnings beat for Nasdaq this time around. This is because the stock needs to have the right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). This is not the case as you can see below.

Earnings ESP: Nasdaq has an Earnings ESP of -0.45%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Nasdaq, Inc. Price and EPS Surprise

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

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

Zacks Rank: Nasdaq currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

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

Intercontinental Exchange ICE has an Earnings ESP of +0.40% and is a Zacks #3 Ranked stock.

American International AIG has an Earnings ESP of +0.85% and is a Zacks #3 Ranked stock.

Arthur J. Gallagher AJG has an Earnings ESP of +1.11% and is a Zacks #3 Ranked stock.

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