Nasdaq Inc.’s NDAQ accelerating organic growth, focus on ramping up the on-trading revenue base, favorable growth estimates, effective capital deployment make it worth retaining in one’s portfolio.
Earnings Surprise History
Nasdaq has a decent earnings surprise history. It beat estimates in each of the last four quarters, with the average being 5.88%.
Zacks Rank & Price Performance
Nasdaq currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 2.7% against the industry’s decline of 30.8%.
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Optimistic Growth Projections
The Zacks Consensus Estimate for Nasdaq’s 2022 earnings is pegged at $2.68, indicating a 6.3% increase from the year-ago reported figure on 4.7% higher revenues of $3.6 billion. The consensus estimate for 2023 earnings is pegged at $2.82, indicating growth of 5.2% from the year-ago reported figure on 4.6% higher revenues of $3.7 billion.
The expected long-term earnings growth rate is currently pegged at 4.7%.
Return on Equity
Return on equity was 22.1% in the trailing 12 months, better than the industry average of 11.4%.
Nasdaq’s growth strategy involves generating more revenues from high-growth Market Technology and Investment Intelligence segments and diverting R&D spending toward higher-growth products.
Given the vast opportunities in the cryptocurrency markets, Nasdaq has been accelerating its technology expansion. Technology expansion with SMARTS surveillance in non-financial markets is in tandem with this growth strategy.
Nasdaq noted that the anti-fin crime space has a total addressable market of $12.5 billion and is expected to witness a CAGR of 17% through 2024. The acquisition of Verafin in February 2021 consolidated Nasdaq's established reg tech leadership to create a global SaaS leader. Nasdaq aims 40-50% Saas revenues as a percentage of total revenues by 2025.
The buyout of Puro.earth and Metrio will help NDAQ address expanding client ESG needs.
NDAQ estimates growth from its index and analytics businesses, followed by moderate growth in its exchange data products across the U.S. and Nordic equities. Nasdaq estimates 5%-8% revenue organic growth in Investment Intelligence, 13%-16% in Market Technology, 3%-5% in Corporate Platforms over the medium term. Nasdaq expects Market Technology revenues to grow 15.3% to $534 million in 2022 while Corporate Platform revenues to grow 9.9% to $673.8 million.
Nasdaq boasts a healthy balance sheet and cash position along with modest operating cash flow from its diverse business model. This, in turn, helps in effective capital deployment. With the 11% hike in April 2022, NDAQ’s dividend recorded an eight-year CAGR (2015-2022) of 11.6%. It had $293 million remaining under its share repurchase authorization as of Sep 30, 2022.
Stocks to Consider
Some better-ranked stocks from the finance sector are Cboe Global Markets, Inc. CBOE, Ameriprise Financial, Inc. AMP and Affiliated Managers Group, Inc. AMG. While Cboe Global sports a Zacks Rank #1 (Strong Buy), Ameriprise Financial and Affiliated Managers carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cboe Global’s earnings surpassed estimates in three of the last four quarters and missed in one, the average surprise being 4.92%. In the past year, Cboe Global’s stock has lost 1.7%.
The Zacks Consensus Estimate for CBOE’s 2022 and 2023 earnings per share indicates year-over-year increases of 12% and 2.9%, respectively.
Ameriprise Financial’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 4.83%. In the past year, Ameriprise Financial has rallied 14%.
The Zacks Consensus Estimate for 2022 and 2023 earnings indicates 7.9% and 18.4% year-over-year growth, respectively.
Affiliated Managers’ earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 5.20%. In the past year, Affiliated Managers has lost 2.1%.
The Zacks Consensus Estimate for AMG’s 2022 and 2023 earnings has moved 8.4% and 5.8% north in the past 30 days.
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