Nasdaq Stock rallies despite net loss

By Jiefei Liu

Despite reporting a quarterly loss, Nasdaq Inc. beat expectations and its stock climbed 3.46 percent.

Nasdaq swung to a net loss of $224 million, or $1.35 per diluted share, from a net income of $131 million, or 77 cents per share, a year earlier primarily due to writing down the eSpeed trade name, Nasdaq’s U.S. Treasury Security electronic trading platform.

Excluding the impact of the writedown and restructuring costs, the company reported non-GAAP diluted earnings of 95 cents per share, surpassing analysts’ expectation of 94 cents polled by Bloomberg.

It reported $599 million revenue in the fourth quarter, up 12 percent from last year’s $536 million.

“We also took strategic steps to better align our business segments, management, resources and clients. While hits had an impact on our quarterly results, we feel it puts us in a stronger position to execute on the market opportunities in front us,” said Adena Friedman, president and chief executive officer.

The company’s market service segment brought $220 million net revenues, constituting 36.7 percent of its entire revenue, up 12.8 percent when compared with the fourth quarter of 2015. The increase was primarily driven by the acquisition of the International Stock Exchange, an operator of three electronic options exchange.

The market service segment includes equity derivatives, cash equities, fixed income and commodities trading and clearing and trade management services. Equity derivatives accounted for $68 million, 31 percent of the market services revenue, up 41.7 percent compared with the last year. The revenues of cash equities trading were $62 million, down 6.1 percent from the last year.

“Competition in the trading space remains fierce, which is why we think Nasdaq has a negative trend,” said Michael Wong, an analyst at Morningstar Inc. Although U.S. cash equities became a smaller part of Nasdaq’s revenues, he still thinks the company’s transaction business will face difficulties and can have spillover effects elsewhere.

Revenues in non-trading segments, including corporate services, information services and market technology segments, grew 11 percent in 2016, or 5 percent excluding the impacts of acquisitions, which hit a record high, said Richard Repetto, an analyst at Sandler O’Neill & Partners LP, in a note.

Revenues from the information services’ data products reached $105 million, constituting 17 percent of the total revenues, up 7.2 percent compared with the same quarter last year.

The revenues of Nasdaq’s corporate services segment, the largest non-transaction segment, were $167 million, up 16.8 percent from the fourth quarter of 2015, of which 12.6 percent were the revenues from the acquisitions of Marketwired LP, a press release and news wire service agency, and Boardvantage Inc., a company providing paperless process services for companies.

Full-year earnings were $108 million, or 64 cents per diluted share, compared with $428 million, or $2.50 per share, in 2015. Revenue reached $2.28 billion, advancing 8.9 percent above 2015’s $2.1 billion.

As to the outlook for 2017, Friedman said the company will focus on the integration of its acquisitions to “ensure their full potential is delivered to our clients and shareholders.”

The stock closed at $70.54, up $2.36.

Photo at top:Times Square NASDAQ Billboard(Naoki Nakashima/Flickr)