Why Is MarketAxess (MKTX) Up 12.7% Since Last Earnings Report?

It has been about a month since the last earnings report for MarketAxess (MKTX). Shares have added about 12.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is MarketAxess due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

MarketAxess Beats Q3 Earnings & Revenue Estimates

MarketAxess Holdings third-quarter 2019 earnings per share of $1.42 beat the Zacks Consensus Estimate by 5.2% and grew 39% year over year.
Better-than-expected results were driven by increased trading volumes.

Operational Update

Revenues of $131.6 million beat the Zacks Consensus Estimate by 2.8% and were up 30% year over year. Commission revenues increased 32.4% year over year to $119.9 million.

All other revenues, which comprise information services, post-trade services and other revenues, increased 7.3% to $11.7 million.

Total trading volumes increased 37% year over year to $528.7 billion.

Total expenses at MarketAxess increased 19.3% from the prior-year quarter to $65.6 million. This rise was due to higher employee compensation and benefit cost, headcount, technology and communication costs, professional and consulting fees, general and administrative costs, and clearing costs.

The effective tax rate was 19.8% in the third quarter, marginally up from 19.3% in the year-ago quarter.

Operating income of $66 million increased 42% year over year.

Financial Update

Total assets were $855 million as of Sep 30, 2019, up 23% from year-end 2018 level.

Total cash, cash equivalents and investments were $556 million, up 14.4% from year-end 2018 level.

During the quarter, the company generated free cash flow of $67.7 million, up 42% year over year.

Share Repurchase and Dividend Update

MarketAxess bought back shares worth $2.8 million in the third quarter.
The company's board of directors declared a quarterly cash dividend of 51 cents per share. The same will be paid out on Nov 20, 2019 to stockholders of record as of the close of business on Nov 6, 2019.

2019 Guidance

MarketAxess reaffirmed its 2019 expense guidance range at $244.0 million to $256.0 million. The expense guidance range excludes any post-acquisition impact of the LiquidityEdge transaction. The company is reconfirming its 2019 overall effective tax rate at 20.5% to 22.5%

The company updated its 2019 capital expenditure guidance range at $31.0 million to $33.0 million from $25.0 million to $30.0 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, MarketAxess has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. It comes with little surprise MarketAxess has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

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