On Tuesday, Tradeweb Markets (NASDAQ:TW) saw its price target increased by an analyst from Jefferies. The target was raised to $130.00 from the previous $118.00, while the Hold rating was maintained. The adjustment follows a revision of the company's third-quarter earnings per share (EPS) forecast, which increased by 10% to $0.76, compared to the consensus estimate of $0.69.
The analyst pointed to higher-than-expected variable trading revenues, which were adjusted upwards by $35 million to $338 million, with notable performance in the Rates and Credit segments. Rates revenues were reported at $173 million, up from the previous estimate of $152 million, and Credit revenues at $110 million, exceeding the earlier forecast of $100 million. The acquisition of ICD, which closed on August 1st, was reflected in the Money Markets figures, which were reported at $32 million versus the previous $39 million.
Average daily volumes (ADV) were revised upwards in most segments, with the exception of Credit Derivatives, which includes China Bonds, witnessing a 32% quarter-over-quarter decrease, and Money Markets. The Fixed Price per Million (FPM) in Rates was adjusted by +3%, attributed to Swaps and lower compression activity. Conversely, the FPM in Credit saw a -28% revision, hitting a two-year low, driven by a shift towards lower-priced derivatives, such as CDX, and a move away from China bonds.
Looking ahead, the analyst has modeled adjusted expenses for 2024 and 2025 at $848 million and $978 million, respectively. This is in comparison to the fiscal year 2024 guidance midpoint of $845 million. Additionally, the analysis anticipates an adjusted margin expansion of approximately +60 basis points in 2024, which is expected to outperform the approximately 50 basis points of expansion projected for 2023.
In other recent news, Tradeweb Markets has reported impressive financial results and strategic developments. The company's September trading metrics and Q3 results exceeded expectations, with average daily volume surpassing projections. This strong performance was recognized by TD (TSX:TD) Cowen, which maintained its Buy rating for Tradeweb. The company's market share saw improvements in high-grade, high-yield, and U.S. Treasury securities, which TD Cowen highlighted as particularly encouraging.
Tradeweb also reported record-breaking trading volumes for September 2024, with a total of $56.1 trillion and an average daily volume of $2.63 trillion, a significant year-over-year increase of 68.3%. This growth was attributed to strong client activity and recent acquisitions, including Yieldbroker, r8fin, and ICD.
Furthermore, Tradeweb announced the addition of Daniel Maguire to its Board of Directors, leveraging his extensive experience in financial services and regulatory frameworks. Analysts anticipate the recent integration of ICD to contribute around $40 million in revenue over the next five months and project an adjusted EBITDA margin expansion slightly above 2023 levels.
InvestingPro Insights
Tradeweb Markets' recent performance aligns with several key metrics and trends highlighted by InvestingPro. The company's strong financial position is reflected in its market capitalization of $31.33 billion and impressive revenue growth of 23.92% over the last twelve months as of Q2 2024. This growth trajectory supports the analyst's optimistic revision of the company's earnings forecast.
InvestingPro Tips indicate that Tradeweb is trading near its 52-week high, with a strong return of 58.99% over the last year. This performance is consistent with the analyst's decision to raise the price target. Additionally, the company's profitability is underscored by its high gross profit margin of 94.26% and operating income margin of 40.18%, which align with the analyst's expectations of margin expansion in the coming years.
It's worth noting that Tradeweb's P/E ratio of 65.33 suggests the stock is trading at a high earnings multiple, which investors should consider in light of the company's growth prospects. For those seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for Tradeweb Markets, providing a deeper understanding of the company's financial health and market position.
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