Nasdaq, Inc. NDAQ has been displaying a consistent operating performance over the past many quarters on the back of organic growth, contributions from both Market Data and Analytics businesses and solid capital position.
The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $6.90 and $7.15, indicating year-over-year increase of 11.6% and 3.5%, respectively.
The Zacks Consensus Estimate for 2021 has moved 0.4% north in the past 60 days. This should instill investors’ confidence in the stock.
Earnings Surprise History
Nasdaq has a decent earnings surprise history. It beat estimates in each of the last four quarters, with the average being 8.3%.
Zacks Rank & Price Performance
Nasdaq currently carries a Zacks Rank #2 (Buy). In the past year, the stock has rallied 40.7% compared with the industry’s increase of 30.6%.
Image Source: Zacks Investment Research
Return on Equity (ROE)
The company’s ROE for the trailing 12 months is 18%, better than the industry average of 11.6%, reflecting the company’s efficiency in utilizing shareholders’ fund.
Organic growth in both Solutions segment businesses and Market Services business is likely to ramp up revenue growth. Notably, the Zacks Consensus Estimate for the company’s 2021 and 2022 revenues is pegged at $3.29 billion and $3.45 billion, indicating year-over-year increase of 13.5% and 4.7%, respectively.
Organic revenue growth, the acquisition of Verafin, and impact from the changes in foreign exchange rates should drive Market Technology revenues.
Investment Intelligence is likely to gain from expanding international demand for proprietary data products, growth in Index business as well as solid contributions from both the Market Data and Analytics businesses.
Nasdaq estimates 5% to 8% revenue organic growth at Investment Intelligence, 8% to 11% at Market Technology and 3% to 5% at Corporate Platforms over the medium term.
Its liquidity was not materially impacted by COVID-19 pandemic. Access to revolving credit facility and commercial paper program are expected to provide enough cash to fund operating expenses, capital expenditures and debt repayments. In January 2021, the size of commercial paper program was increased from $1 billion to $1.25 billion. In February 2021, it issued $475 million of commercial paper to partially fund the acquisition of Verafin.
Nasdaq has narrowed the 2021 non-GAAP operating expense guidance to a range of $1.57 billion to $1.62 billion, which indicates broad-based organic revenue growth in the first quarter and the impact that growth has on variable expenses like performance-based compensation and marketing commitments.
Riding on solid balance sheet, the company increased dividend at a five-year CAGR (2014-2021) of 22.6%. It currently yields 1.2%, which is better than the industry average of 1%. Currently, it has $248 million remaining under its share repurchase authorization.
Other Stocks to Consider
Some other top-ranked stocks from the finance sector include Visa Inc. V, Evercore Inc. EVR and Tradeweb Markets Inc. TW, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Visa surpassed estimates in each of the last four quarters, the average beat being 7%.
Evercore surpassed estimates in each of the last four quarters, the average beat being 98.29%.
Tradeweb surpassed estimates in each of the last four quarters and missed the mark in the remaining one, the average beat being 0.86%.