MarketAxess Q3 Results Beat Estimates, Acquires Xtrakter From Euroclear (MKTX)

Bond trading platform provider MarketAxess Holdings (NASDAQ: MKTX) reported a rise in the fiscal 2012 third-quarter revenue and earnings compared to the year-ago corresponding quarter. The declared third-quarter results beat analysts’ estimates. Additionally, MarketAxess declared a quarterly dividend of $0.11 per share. The company also announced that it has agreed to acquire Xtrakter Limited, a provider of regulatory transaction reporting, financial market data and trade matching services to the European securities markets.

The New York-based MarketAxess operates an electronic trading platform that allows investment industry professionals to trade corporate bonds and other types of fixed-income instruments. The company also provides corporate BondTicker service, which offers fixed-income market data, analytics and compliance tools that assist clients to make trading decisions.

Total revenues for the fiscal 2012 third-quarter increased 3.6% to $48.26 million from $46.56 million in the prior-year similar period.  The consensus estimate of analysts was $47.65 million for the third quarter of fiscal 2012.

Net income for the reported quarter was $13.48 million, or $0.36 per share, compared to $13.44 million, or $0.34 per share, in the third quarter of fiscal 2011. The average street estimate of analysts was $0.32 per share for the third quarter of 2011.

Commenting on the results, Richard McVey, chairman and CEO of MarketAxess, stated, “We are pleased with our solid market share gains in U.S. high-grade this quarter and the continued strong growth in high-yield and emerging markets trading volume. U.S. high-grade TRACE volume also rebounded significantly in the past two months, following softer volumes in August.”

The stock price of MarketAxess remained between $25.00 and $30.00 for most of 2011. The fiscal 2011 fourth-quarter earnings that beat estimates initiated a short-term rally that ended after the share price hit a peak of $34.35 on February 3, 2012. When the Wall Street Journal reported that BlackRock (NYSE: BLK) intends to launch its own trading platform, the share price of MarketAxess underwent a correction. By mid-May the share price had touched a low of $31.49. MarketAxess reported a decline in the monthly trading volumes for the month of May. This statistic dragged the company’s share price to a low of $26.22 on June 28. A strong fiscal 2012 second-quarter earnings reported in the month of July turned the sentiment positive resulting in an uptrend in the share price to $33.24 on August 10. The below-par monthly trading volume statistics for August, as well as a rating downgrade by Stifel Nicolaus from “buy” to “hold”, resulted in a drop in the share price to $28.87 on September 7.  The share price, which recovered back to around $32.00, received another blow when Credit Suisse downgraded MarketAxess from “neutral” to “underperform” on September 26.

After opening relatively unchanged from the previous close of $31.50, the share price of MarketAxess briefly increased by 20 cents to $31.70. The selling pressure that emerged at higher levels pushed the share price into negative territory. At noon, the share price made a futile attempt to retrace losses. The shares were mostly traded near the day’s low during the last hour of trading.

MarketAxess agreed to acquire Xtrakter, a wholly owned subsidiary of Euroclear SA/NV, for a consideration of approximately $42 million in cash plus transaction costs. MarketAxess expects the acquisition to be completed in the first quarter of 2013.

Commenting on the acquisition, Rick McVey said, “Xtrakter is a strong fit with our business and provides MarketAxess with an expanded set of services that are highly complementary to our core strengths in electronic trading, market data and straight-through processing solutions for the global credit markets.”

Tim Howell, Chief Executive Officer of Euroclear, commented, “Xtrakter colleagues and clients will find an innovative and strong team at MarketAxess who are eager to move quickly and assertively to develop the portfolio of Xtrakter services to meet changing market needs. Post acquisition, we will continue working with Xtrakter and MarketAxess to deliver further transparency and efficiency to the international capital markets.”

MarketAxess announced that the quarterly cash dividend of $0.11 per share will be paid on November 26, 2012, to the stockholders of record as of the close of business on November 12, 2012.

MarketAxess ended the day at $31.03 per share, down $0.49 or 1.6% on a volume of 281,183 shares.

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Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.