MarketAxess Holdings Inc. outperformed market expectations in the fourth quarter of 2023, buoyed by a surge in commissions and trading volumes. The company’s Eurobonds’ performance continued to strengthen its position, while facing some headwinds such as elevated expenses and lower High-yield credit trading.
The company reported fourth-quarter earnings per share of $1.84, surpassing the Zacks Consensus Estimate by 7% and marking an improvement from $1.58 per share a year earlier.
Total revenues for the quarter increased by 10.9% year over year to $197.2 million, beating the consensus mark by 0.7%.
Full-Year Performance
In 2023, MarketAxess recorded revenues of $752.5 million, reflecting a 4.8% increase from the previous year. The bottom line rose 3% year-over-year to $6.85 per share, while operating income declined by 3.6% to $315 million.
MarketAxess Holdings Inc. Price, Consensus, and EPS Surprise
MarketAxess Holdings Inc. Price, Consensus, and EPS Surprise | MarketAxess Holdings Inc. Quote
Quarterly Operational Performance
Commission revenues rose by 8.5% year over year to $171.9 million in the fourth quarter, slightly exceeding the estimated $171 million. Information services revenues reached a record $11.9 million, an increase of 14.6% year over year. Post-trade services revenues also saw a significant increase, reaching $11 million. However, total expenses escalated by 19.9% year over year to $120.2 million.
MarketAxess reported an operating income of $77 million, down 0.8% year over year, with an EBITDA margin of 50%—a decrease from 51.7% a year ago.
Trading Volumes
MarketAxess witnessed an impressive 15.1% increase in high-grade trading volume to $385.3 billion in the fourth quarter, outperforming the estimated 5%. The company also experienced positive growth in various other credit trading volumes.
Balance Sheet and Cash Flows
At the end of the fourth quarter of 2023, MarketAxess held cash and cash equivalents of $451.3 million, an increase from the previous year. The company also reported improved total assets and total stockholders’ equity.
Further, MarketAxess generated cash from operations of $141.7 million in the fourth quarter, up from $134.2 million a year ago, with free cash flow marginally increasing to $94.9 million.
Dividend Update and 2024 Guidance
Management approved a quarterly cash dividend of 74 cents per share, signaling confidence in the company’s financial standing. Looking ahead, MarketAxess expects revenue growth from the Pragma acquisition, with expenses estimated to be between $33-$35 million. The company also outlined its projections for total expenses, capital expenditure, and effective tax rate for the year 2024.
Zacks Rank & Other Key Picks
MarketAxess holds a favorable Zacks Rank #2 (Buy). The company remains an attractive prospect among other top-ranked stocks in the broader Finance space, including Alerus Financial Corporation, Cboe Global Markets, Inc., and Axos Financial, Inc.
As MarketAxess continues to demonstrate its solid fundamentals and resilience in a competitive market, the company’s future looks promising for investors and stakeholders alike.
