NASDAQ Exits 2011 Feebly - Analyst Blog


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NASDAQ OMX Group Inc. 's ( NDAQ ) fourth-quarter 2011 operating earnings per share of 63 cents came a nickel below the Zacks Consensus Estimate of 68 cents but modestly ahead of 55 cents in the prior-year quarter, based on lower share count.

NASDAQ's GAAP net income came in at $82 million or 45 cents per share, lagging behind $137 million or 69 cents per share recorded in the year-ago quarter. Results in the reported quarter included $44 million (pre-tax) of debt extinguishment, asset impairment charges and merger and strategic initiatives. These were partially offset by tax benefit of $13 million. Excluding this, net income was $113 million compared with $110 million in the year-ago quarter. Besides, total operating income, on non-GAAP basis, edged up 1.6% year over year to $187 million.

Total net exchange revenues increased 5.5% year over year to $422 million, also exceeding the Zacks Consensus Estimate of $419 million. The upside was supported by modest growth across most segments including market data, transaction, issuer services and market technology along with improved average fees per contract. These were, however, modestly offset by weak volumes and continued sluggishness in cash equity trading and derivative trading along with adverse exchange rates.

Segment wise, Market Services net exchange revenues for the quarter climbed 6.0% from the year-ago period to $281 million. Issuer Services revenues for the reported quarter were $93 million, up 4.5% from the year-ago period on flattish to slight uptick from global index group coupled with growth in global listing services revenue. Market technology revenues grew 4.4% year over year to $48 million.

During the reported quarter, NASDAQ's order intakes sharply plunged to $36 million from $71 million in the year-ago quarter. Consequently, total order value (the value of orders signed that have not been recognized as revenue) weakened to $458 million from $495 million in the prior-year quarter.

Meanwhile, on non-GAAP basis, operating expenses increased 8.8% from the prior-year period to $235 million, primarily due to costs associated with FTEN and Zoomvision Mamato acquisitions. Additionally, higher marketing and advertising expenses, and incremental spending for professional and contract services spurred expense growth. Consequently, operating margin slipped to 44% from 46% in the year-ago quarter. On GAAP basis, total operating expenses surged 16.0% year over year to $261 million.

Full-Year 2011 Highlights

For full year 2011, operating net income stood at $455 million or $2.53 per share against $411 million or $1.99 per share recorded in 2010. Operating earnings per share also beat the Zacks Consensus Estimate by a couple of cents. Including extraordinary items of $68 million or 38 cents per share, GAAP net income came in at $387 million or $2.15 per share, down from $389 million or $1.91 per share in 2010, based on lower share count.

Total net exchange revenues increased 11.0% year over year to $1.69 billion, but came in line with the Zacks Consensus Estimate. On GAAP basis, total operating expenses surged 11.6% year over year to $994 million, while on non-GAAP basis, operating expenses spurted 11.5% from 2010 to $921 million. Total operating income, on non-GAAP basis, escalated 10.5% year over year to $769 million in 2011.

Capital Plan

On October 12, 2011, NASDAQ declared a new capital plan, according to which the board of NASDAQ announced the approval of a new stock repurchase program worth $300 million through open market operations. Accordingly, during the reported quarter, the company bought back 3.98 million shares for $100 million, at an average price of $25.10.

Financial Update

As of December 31, 2011, NASDAQ had cash and cash equivalents of $506 million, significantly up from $315 million at the end of 2010. Debt obligations lowered to $2.07 billion from $2.18 billion at 2010-end as a debt prepayment of about $100 million was made during the reported quarter, as disclosed in management's capital plan. While total assets decreased to $14.09 billion, total equity grew to $4.99 billion, over 2010.


For fiscal year 2012, NASDAQ management contracted its operating expense outlook to the range of $915-935 million. This excludes approximately $40-50 million of incremental expenses from new initiative spending. However, including these charges, total operating expenses are projected to be within $955-985 million.


During the reported quarter, NASDAQ processed 16 initial public offerings (IPOs), although new listings totaled 56 against 63 in the year-ago quarter.  

Meanwhile, NASDAQ's arch-rival NYSE Euronext Inc. ( NYX ) is slated to release its earnings results before the market opens on February 10, 2012.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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