Raymond James has initiated coverage on TMX Group (TMXXF, Financial) with an Outperform rating, setting a price target of C$59. Recognized as Canada's leading stock exchange, TMX Group offers extensive listing and trading services, in addition to operating as a derivatives exchange with clearing capabilities. It also boasts platforms for fixed income and energy trading. According to the analyst, TMX Group has successfully executed a strategy that has broadened its operational scope while maintaining a robust operating margin. Over the past two years, the company has generated in excess of $1 billion in free cash flow, highlighting its financial strength.
TMXXF Key Business Developments
Release Date: May 06, 2025
- Revenue: Increased 21% year over year, reaching a record quarter.
- Organic Revenue Growth: Excluding acquisitions, organic revenue increased 19%.
- Adjusted Earnings Per Share: Increased 26% from the first quarter of 2024.
- Derivative Trading and Clearing Revenue: Increased 42% year over year.
- Equity and Fixed Income Trading Revenue: Increased 24% over Q1 of 2024.
- Global Insights Revenue: Increased 14% in Q1 of 2025.
- Tradeport Revenue: Grew 20% compared to last year.
- Vetify Revenue: Increased 21% year over year.
- Capital Formation Revenue: Increased 10% compared to Q1 2024.
- Operating Expenses: Increased 16% year over year.
- Debt to Adjusted EBITDA Ratio: 2.5 times as of March 30th.
- Cash and Marketable Securities: Over $361 million as of March 31st.
- Quarterly Dividend: $0.20 per common share, with a payout ratio of 42% for Q1.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TMX Group Ltd (TMXXF, Financial) reported a record revenue increase of 21% year-over-year for Q1 2025, driven by growth across traditional and new business areas.
- Adjusted earnings per share increased by 26% compared to the first quarter of 2024, highlighting strong financial performance.
- The launch of the new US equity trading venue, Alpha XUS, has been well-received, with average daily volume growing each month since its launch.
- The successful implementation of the post-trade modernization platform (PTM) marks a significant upgrade in TMX's infrastructure, enhancing operational efficiency and future growth potential.
- TMX Group Ltd (TMXXF) has maintained a strong balance sheet, with a debt to adjusted EBITDA ratio of 2.5 times, and has returned to its target leverage range, providing flexibility for future strategic investments.
Negative Points
- Total expenses increased by 16% year-over-year, driven by higher employee performance incentive plan costs and strategic realignment expenses.
- Despite revenue growth, the company faces challenges in capital raising conditions, particularly outside the mining sector.
- The integration of recent acquisitions has led to additional operating expenses, impacting overall cost management.
- The post-trade modernization project, while successful, has required significant resources and may continue to present challenges during the hypercare period.
- Market volatility and macroeconomic uncertainties pose ongoing risks to trading volumes and overall financial performance.
