The Board declared a quarterly cash dividend of $0.72 per share, payable on February 22, 2023.
MarketAxess Holdings Inc (MKTX) is a leading electronic trading platform for fixed-income securities, which includes corporate bonds, municipal bonds, and emerging market debt. The company was founded in 2000 and is headquartered in New York City. Its primary customers include institutional investors, such as asset managers, hedge funds, and pension funds, as well as banks and broker-dealers. While MKTX has had an impressive financial performance, the company does face some specific problems.
One challenge the company faces is market saturation. With an increasing number of players entering the market, MKTX faces increasing competition. Moreover, regulations could also impact the company's performance, as changes in regulations could increase the cost of doing business or limit the range of services provided by the company.
Despite these challenges, the company has achieved significant success in recent years. In 2019, the company launched a new platform called LiquidityEdge, which provides a service that complements the existing MarketAxess platform by focusing on US Treasuries trading. The acquisition of LiquidityEdge was a major success for the company, as it enabled it to expand its reach into the US Treasury market.
MKTX Dividend Coming Feb 22
A modest 42% of MarketAxess Holdings' profits have been distributed as dividends. The company has paid a total of US$2.88 per share over the past 12 months, and its upcoming dividend payment per share will be US$0.72. Since it's simpler to increase dividends when earnings per share are increasing, MarketAxess Holdings's earnings per share have been increasing at a rate of 11% annually for the previous five years and concurrently the company has also boosted its dividend by an average of 21% a year over the past ten years. In recent years, per-share earnings and dividends have both been increasing quickly.
4Q22
MarketAxess Holdings Inc. (MKTX) reported its Q4 2022 financial results, showing an 8% increase in revenues to $177.9 million compared to the same period last year. The company's total credit average variable transaction fees per million ("FPM") decreased by 9%, which was driven primarily by the lower duration of bonds traded in U.S. high-grade, leading to lower transaction fees. However, excluding the impact of foreign currency fluctuations, revenues would have increased by approximately 10%.
MKTX's estimated market share also increased, with record figures across composite corporate bonds (+210 bps), high-yield (+500 bps), emerging markets (+290 bps), Eurobonds (+500 bps), and municipal bonds (+260 bps). The company's total credit average daily volume increased by 24% to $12.0 billion, representing the third-highest quarter ever, while operating income increased by 7% to $77.7 million, and operating margin was 43.7%.
The company's net income for the quarter was $59.2 million, which was a 15% increase in diluted EPS to $1.58, and a net income margin of 33.3%. Additionally, MKTX's EBITDA increased by 10% to $95.2 million, with an EBITDA margin of 53.5%, up from 52.3% in the prior year. The company also set a record of 2,068 total active firms, up 10%, and 11,679 total traders, up 6%.
MKTX's Open Trading feature continued to be successful, accounting for a record 38% of total credit trading volume, up from 36% in the prior year, with an estimated price improvement of approximately $246 million. MarketAxess also delivered record revenues of $718.3 million for the full-year 2022, up 3%, despite a 10% decline in total credit average FPM, and achieved record commission revenue across high-yield, emerging markets, Eurobonds, municipal bonds, and U.S. Treasuries.
Overall, MKTX's Q4 2022 results showed a strong performance, with increased revenues, estimated market share, and trading volume across most of its product areas, which can be attributed to its unique all-to-all liquidity pool feature in Open Trading. The company is well-positioned to take advantage of a favorable backdrop for fixed income in 2023, creating an attractive operating environment for its business model.
Reflecting on 2022 - Was it a good year for MKTX?
In 2022, the company saw a 2% increase in its total credit commission revenue of $618.6 million, with a record $11.8 billion in total credit trading average daily volume (ADV), up 13% from the prior year. The growth in revenue was driven by higher trading volumes, strong estimated market share gains, and increased trading by institutional clients. The company also saw a record 19.9% estimated market share for composite corporate bonds and a 10% increase in U.S. high-grade ADV to a record $5.5 billion.
Open Trading executed a record 36% of total credit trading volume. The company's total rates commission revenue was $22.6 million, a 34% increase from the prior year, and information services revenue was $39.3 million, a 3% increase, driven by new data contracts. Post-trade services revenue was $36.9 million, a 5% decrease, due to the impact of foreign currency fluctuations and planned customer attrition. Total expenses of $391.4 million increased by 8%, driven by higher employee compensation, investments to enhance the trading system and data products, and higher technology and communication expenses. The company had $514.5 million in cash, cash equivalents, and investments, with no outstanding borrowings under its credit facility.
Expectations for 2023
Based on the foreign exchange rates as of December 31, 2022, the Company has provided its financial guidance for the full year 2023. Total expenses are expected to be in the range of $418.0 million to $446.0 million. The midpoint of the stated guidance range indicates that operating expenses will increase by about 10%. The Company's overall effective tax rate is expected to be between 25.0% and 26.0%. Additionally, capital expenditures to support new protocols, products, and trading platform enhancements are projected to be in the range of $52.0 million to $58.0 million for 2023.
AI Trading
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MKTX stock has been a strong performer with a healthy dividend and has demonstrated significant potential for future growth. Over the last quarterly stock prediction (90 days) MKTX earned 34.32% in profit. The dividend to be released on Feb 22nd only makes it a sweeter deal.
Below is our stock pick from our three-month stock forecast announcing MKTX as a buy on November 16th, 2022. This stock pick has been available in multiple forecasts continuously over various time frames. As a subscriber, when you view your forecasts published daily, you can recognize better opportunities by looking for repetition of certain stock picks repeatedly remaining in the AI forecasts. Another indicator is when you see the stock pick appear in multiple forecasted time frames, especially over multiple forecasts published each morning EST.
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The AI-powered stock market analysis computes the Signal Confidence (SC), which is expressed as a percentage out of 100%, based on the historical accuracy of each previous financial asset prediction, as well as current market factors relevant to stock pricing. The Signal Confidence (SC) in this stock forecast is 76%.
You can improve decision-making, outcome modeling and forecasting, and market information by combining big data analytics with our AI-powered stock prediction system. The main advantage of using AI for stock market analysis is that it can examine more assets objectively and continuously at all times of the day guiding you on how to make a profit even when the markets are as bearish as they are these days. The AI stock prediction system analyzes empirical data on financial market irregularities linked to trader overreaction and underreaction to produce circadian forecasts in various frames. Every day, you will be updated with the best potential stock opportunities identified by AI that are offered from short-term to longer-term time frames.
As a general rule of thumb, longer-term predictions tend to be much more accurate and the profits generated tend to be more substantial making our AI trading signals ideal for value-based investors. Subscribers who bought MKTX stock based on our quarterly AI stock prediction on November 16th, 2022 generated a profit of 34.32%.
Stock Ticker | Open: Dec 16, 2022 | Close: Feb 14, 2022 | ROI% |
MarketAxess Holdings Inc (MKTX) | $265.10 | $356.08 | 34.32% |
While this stock was available in our Top 10 package, we advise a larger forecast because it provides much more market coverage, makes it much easier to follow trends, and of course, you will certainly see A LOT more market opportunities. Click here to see the original forecast published on November 16th, 2022. Discretion should always be used when analyzing the market. Your own due diligence is always required and you should always get advice from a licensed financial counselor prior to implementing any financial plans.
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Sources: 1. MarketAxess Holdings Inc Investor Relations, "Dividend history" (2023)
2. MarketAxess Holdings Inc Investor Relations, "MarketAxess Reports Fourth Quarter and Full-Year 2022 Results" (2023)
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