Nasdaq OMX Group Inc.
) recently announced that its Board of Directors has increased its
authorization to repurchase its common stock by approximately $300
million, which is equivalent to roughly 8% of the outstanding
shares at the current share price.
The company said that it will fund the repurchase using its
existing cash balances, which as of June 30 stood at $491 million,
down from $525 million as of March 31, 2012.
NASDAQ also specified that the buyback would be done gradually.
It might resort to open market purchases, privately-negotiated
transactions, block purchase techniques or any other means as
decided by management.
The decision to repurchase is in line with the company's
strategy to capitalize on the available funds and boost
shareholders value in the process. NASDAQ, since 2009, has bought
back $1.1 billion of outstanding common stock that corresponds with
roughly 50 million shares at an average price of $21.85. The
buyback has reduced the company's share base by 22% during the
NASDAQ strategizes to have a strong return on investment (ROI)
in order to increase shareholders worth. The company's ROI of 6.4%
is in line with that of its rival
NYSE Euronext, Inc.
), and is considerably higher than the industry average of 1.1%. It
is also higher than 4.7% for its peer
CME Group Inc.
NASDAQ recently released its second quarter results. Its
earnings per share of 64 cents surpassed the Zacks Consensus
Estimate of 60 cents and the prior-year quarter's earnings of 62
cents a share. However, its cash equities and derivatives remain
feeble, based on lower industry trading volumes and unfavorable
impact from foreign exchange.
Even though the increased share repurchase represents a positive
step by the company in the interest of its shareholders, we remain
cautious regarding its decreasing cash position, which has declined
annually as well as sequentially given its decision to utilize the
same in the buyback process.
NASDAQ's share fell 16 cents (or 0.70%) to close at $22.63
yesterday. The company currently retains a Zacks #3 Rank, which
translates into a short-term Hold rating. We maintain a long-term
Neutral recommendation on its shares.
CME GROUP INC (CME): Free Stock Analysis Report
NASDAQ OMX GRP (NDAQ): Free Stock Analysis
NYSE EURONEXT (NYX): Free Stock Analysis Report
To read this article on Zacks.com click here.