Nasdaq shares are likely to beat street expectations in the fourth quarter

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Nasdaq (NASDAQ: NDAQ) is expected to report its fourth quarter 2022 results on Wednesday, January 25, 2023. We expect Nasdaq to surpass consensus estimates for earnings and earnings. The exchange reported mixed results in the last quarter, with net income (total income less transaction-based costs) coming in just short of expectations despite an increase of 6% yoy to $890 million. Growth was driven by an 8% increase in non-trading revenue (solutions segment), supported by a 4% increase in market services (trading revenue). We expect the same trend to continue in the fourth quarter.

Our forecast indicates that Nasdaq valuation is $68 per share, which is 8% higher than the current market price of about $62. Our interactive dashboard analysis on Nasdaq’s Earnings Preview has more details.

(1) Earnings are expected to remain slightly above consensus estimates

Nasdaq Earnings grew 5% yoy to $4.6 billion in the first three quarters of 2022, translating to net sales of $2.68 billion – up 6% yoy. This was driven by higher revenues in the solutions segment (including market technology, investment intelligence and enterprise platforms).

  • Total revenue in the market services segment increased 3% yoy to $2.9 billion in the first nine months of 2022. However, it translated into net segment revenue of $923 million – just below the year-ago figure, due to higher transaction-related costs. Furthermore, the company recently released its fourth quarter volume statistics. While matched equity volume in the US increased 3%, all other asset classes declined. We expect fourth quarter results to be in line.
  • Nontrading revenues rose 11% yoy to $1.74 billion in the first three quarters of the year. We expect the same trend to continue in the fourth quarter.
  • Overall, we forecast Nasdaq’s total revenue for the full year FY2022 to remain around $6.2 billion.

Trefis estimates Nasdaq’s Q4 2022 net income to be approximately $915 million, 1% above the consensus estimate of $910 million.

(2) EPS is likely to be slightly better than consensus estimates

Nasdaq Q4 2022 adjusted earnings per share expected to be $0.67 according to Trefis analysis, 3% above consensus estimate of $0.65. Adjusted net income declined 5% year-over-year to $884 million in the first nine months of 2022 due to lower non-operating income. We expect the fourth quarter results to follow the same trend. All in all, Nasdaq is likely to report annual GAAP EPS of $2.37 for the full year 2022.

(3) Estimated share price is 8% above current market price

We arrive at NASDAQ valuationbased on an earnings per share estimate of approximately $2.37 and a P/E multiple of just under 29x in fiscal 2022. This translates to a price of $68, which is 8% more than today market price of nearly $62.

Note: P/E multiples are based on year-end share price and reported (or expected) full-year adjusted earnings

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