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MarketAxess (MKTX) Q4 Earnings Top on Credit Trading Volume

MarketAxess Holdings Inc. MKTX reported fourth-quarter 2022 earnings per share of $1.58, beating the Zacks Consensus Estimate of $1.53 and our estimate of $1.45. The bottom line increased 15.3% year over year.

Total revenues of $177.9 million rose 7.8% year over year in the quarter under review and beat the consensus mark of $176 million and our estimate of $175.7 million.

The strong quarterly results were supported by solid growth in credit trading volumes across all product categories of MarketAxess, which provided higher commissions. However, lower total rates trading volumes and escalating operating costs partially offset the upside.

2022 Update

Total revenues of $718.3 million increased 2.8% from 2021 levels, beating our estimate of $716.1 million and the consensus mark of $716.7 million. Total expenses of $391.4 million rose 8.2% from 2021 levels but were lower than our estimate of $397.8 million. The 2022 bottom line of $6.65 per share was down from $6.77 a year ago but beat the Zacks Consensus Estimate of $6.61.

MarketAxess Holdings Inc. Price, Consensus and EPS Surprise

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

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

Quarterly Operational Update

Active clients of MarketAxess totaled 2,068 in the fourth quarter, which increased 10% year over year. Active international clients attained a record figure of 1,006 in the quarter under review. The figure advanced 5% year over year.

Commission revenues of $158.4 million increased 8.6% year over year, beating our estimate of $156 million. While information services and other revenues increased 8.8% and 10.6% year over year, respectively, post-trade services revenues fell 5.8%.

MarketAxess’ U.S. high-grade trading volume came in at $334.7 billion, up 20.5% year over year in the fourth quarter and comfortably beating our estimate of $316.3 billion. Rising by 22.4% as that of the trading volume, the average daily volume (ADV) of the same product category came in at $5.5 billion, beating our estimate of $5 billion. The figure also beat the Zacks Consensus Estimate of $5.2 billion.

Other credit trading volume of $31.4 billion increased 340.4% year over year. ADV of the same product also increased 347.8% year over year in the quarter under review.

The emerging markets' trading volume and ADV improved 1.3% and 2.9%, respectively, on a year-over-year basis. The total rates trading volume and ADV, however, fell 7% and 5.5%, respectively, year over year in the quarter under review.

Total credit trading of $737.7 billion jumped 22.1% year over year, while ADV of $12 billion rose 24%.

Total rates trading of $1,121.7 billion declined 7% year over year, while ADV of $18.4 billion fell 5.5%.

Total expenses increased 8.4% year over year to $100.2 million, mainly due to elevated employee compensation and benefits and technology and communication expenses, partially offset by a 26.9% decline in professional and consulting fees. Total expenses were slightly lower than our estimate of $106.6 million.

Operating income of $77.7 million advanced 7% year over year in the fourth quarter.

Balance Sheet (as of Dec 31, 2022)

MarketAxess exited the fourth quarter with cash and cash equivalents of $430.7 million, which plunged from the 2021-end level of $506.7 million. Total assets of $1.6 billion increased from the figure of $1.5 billion as of Dec 31, 2021.

It had no outstanding borrowing under its credit facility at 2022-end. Total stockholders’ equity of $1.1 billion increased from the $1 billion level at 2021 end.

Cash Flows

MarketAxess generated cash from operations of $134.2 million in the fourth quarter, which declined from $145.7 million a year ago. However, free cash flows were recorded at $94.1 million, rising from $72 million in the prior-year period.

Dividend Update

Management approved a quarterly cash dividend of 72 cents per share, which will be paid out on Feb 22, to shareholders of record as of Feb 8. The latest dividend indicates 2.9% sequential increase.

2023 Guidance

Expenses for the year are now predicted within $418-$446 million compared with the 2022 level of $391.4 million.

Capital expenditures are expected between $52 million and $58 million.

The effective tax rate is likely to be in the 25-26% range.

Zacks Rank & Key Picks

MarketAxess currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader finance space are Cboe Global Markets, Inc. CBOE, American International Group, Inc. AIG and Ares Capital Corporation ARCC, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chicago, IL-based Cboe Global Markets is one of the largest stock exchange operators by volume in the United States. The Zacks Consensus Estimate for CBOE’s 2022 earnings indicates a 14.2% year-over-year increase.

Headquartered in New York, American International is a leading global insurance organization. The Zacks Consensus Estimate for AIG’s 2022 earnings has increased 1.8% in the past 30 days.

Based in Los Angeles, CA, Ares Capital specializes in rescue financing of middle-market companies. The Zacks Consensus Estimate for ARCC’s 2022 earnings suggests 17.5% year-over-year growth.

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Ares Capital Corporation (ARCC) : Free Stock Analysis Report

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

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