MarketAxess Beats Estimates But Falls Year on Year but Company Expected to Do Well

MarketAxess Holdings, a company that runs a trading platform for the institutional credit markets, has hit second-quarter earnings of $1.77 per share which shows a decline of around 20% when compared to the earnings of last year.

As with the earnings, the revenues and trading volumes have also shown a sharp drop when compared to the previous year as the market overall seems to be generating less interest for the firms this quarter. The company had revenue of $176.3 million which shows a decline of 5% when compared to the revenues from the same period last year.

The reason that is being given for the low volumes and the revenues is the fact that the volatility has been very less in the credit markets as compared to last year when the volatility was strong and the revenues were also commensurate with the high volatility. These are generally a measure of the risks that are there in the markets and last year, due to the pandemic, there were a lot of risks all around which increased the volatility in the credit and bond markets. With the pandemic receding slowly and steadily across the world, the volatility is also beginning to subside.

The revenue is based on the commissions and fees that the company collects for the trades made on the platform and with the trade volume being low, the revenue has also been low. The commission revenue has come in at $156.4 million which is a fall of 9.1% from last year. Surprisingly, the operating expenses rose during this period to $89.2 million which is a 10.5% increase Year on Year and this has further weighed on the margins and the earnings as well.

Analysts continue to believe in the strong business model that the company has and believe that this fall in volumes and revenue is going to be a small blip in the long journey of the company. They point to the innovative business model of the company in bringing the bond market trading electronically and also introducing the automated trading feature as well. The company has also been looking to expand to Europe and other regions and this is expected to boost its volumes and revenues in the long term. The bond market is due for a lot of innovation and as long as the company stays on top of the upgrades and features, it should be able to continue to do well.