NYSE Euronext Inc.
) second-quarter 2012 operating earnings per share of 51 cents were
a penny higher than the Zacks Consensus Estimate of 50 cents but
were lower than 61 cents recorded in the year-ago quarter.
Operating net income plunged 20% year over year to $128 million
from $160 million in the year-ago quarter.
NYSE reported GAAP net income of $125 million or 49 cents per
share compared with $154 million or 59 cents per share in the
prior-year quarter. These primarily include the impact of pre-tax
merger expenses and exit costs of $12 million in the reported
quarter versus $31 million in the year-ago quarter, along with loss
from disposal activities of $2 million. These were partially offset
by tax benefit of $45 million in the reported quarter against $42
million in the year-ago quarter.
Gross revenues plummeted 9.7% year over year to $986 million in
the reported quarter. Meanwhile, net revenues (defined as gross
revenues less direct transaction costs consisting of Section 31
fees, liquidity payments and routing and clearing fees) stood at
$602 million, sliding 8.9% from $661 million in the prior-year
quarter. It also came lower than the Zacks Consensus Estimate of
The deteriorating performance was primarily due to the poor
transaction and clearing fees that fell 12.5% year over year to
$649 million as well as market data revenue that declined 5.4% year
over year to $87 million. Together, these constitute about 75% of
the gross revenue.
While listing revenue remained unchanged at $112 million,
technology service revenue also slipped 2.2% to $87 million and
other revenue that deteriorated 10.5% year over year to $51
Revenue from derivatives reduced 14.6% year over year to $182
million, whereas cash trading and listings' revenue dipped 8.3%
year over year to $300 million. Moreover, revenue from information
service and technology solutions edged down 2.5% year over year to
Overall, top-line results reflected declining volumes across all
global derivatives and cash trading venues. Alongside, unfavorable
currency fluctuations and lower average revenue per contract added
to the woes.
However, fixed operating expenses dipped 5.5% year over year to
$396 million, although operating margin deteriorated to 34% from
37% recorded in the year-ago quarter. In the reported quarter,
total headcount at NYSE was 3,062, marginally down from 3,077 as of
December 31, 2011 but up from 2,988 as of June 30, 2011. The
effective tax rate was 25% as compared with 26% in the year-ago
Additionally, during the reported quarter, NYSE raised $7.3
billion in total global proceeds from 21 initial public offerings
(IPOs) on its European and US markets, more than any global
exchange group. This came in lower than the prior-year period and
prior quarter level.
As of June 30, 2012, NYSE's total debt of $2.3 billion was
higher than $2.1 billion at 2011-end. At the end of the reported
quarter, cash and cash equivalents, investments and other
securities were $0.4 billion while net debt was $1.9 billion. Total
capital expenditures increased to $41 million from $31 million
recorded in the year-ago quarter.
As a result of higher capital expenditure and debt, NYSE's
debt-to-EBITDA ratio deteriorated to 2.1x from 1.6x recorded at the
end of 2011, which was the lowest level since the inception of the
organization in April 2007.
During the reported quarter, NYSE entered into a three-year
senior unsecured credit facility agreement worth $1 billion,
scheduled to mature on June 15, 2015. This financing replaces
NYSE's existing $1.2 billion credit facility, which was entered
into in 2007 and scheduled to mature on July 31, 2012. The new
revolving bank facility is projected to be utilized for general
Stock Repurchase Update
During the reported quarter, NYSE bought back 6.9 million shares
at an average price of $25.60 per share for about $177 million,
thus buying back 11.0 million shares for $304 million in the first
half of 2012. Accordingly, the company had $248 million of stock
available for repurchases at the end of June 2012. Management is
also committed to complete this sanctioned share repurchase by the
end of 2012.
Last year, NYSE had resumed its $1.0 billion share buyback plan,
which was sanctioned in March 2008. However, this plan was shelved
in the fourth quarter of 2008, within which the company had already
bought back shares worth $350 million. Additionally, NYSE bought
back worth $100 million of stock during the fourth quarter of 2011,
leaving $552 million in the current stock repurchase authorization
Long-Term Growth Outlook
While management laid out a detailed long-term growth plan in
the previous quarter, NYSE believes that its ongoing strategic
initiatives coupled with its cost reduction plan and lower share
count from stock repurchases should aid in achieving higher
earnings growth in 2013 and beyond.
Concurrently, the board of NYSE declared a regular quarterly
dividend of 30 cents per share, which is payable on September 28,
2012, to the shareholders of record as on September 14, 2012.
Furthermore, on June 29, 2012, NYSE had paid a quarterly cash
dividend of 30 cents to shareholders of record as on June 15,
Last week, a couple of NYSE's rivals reported their first
NASDAQ OMX Group Inc.
) reported its second quarter operating earnings per share of 64
cents, surpassing the Zacks Consensus Estimate of 60 cents and the
prior-year quarter's earnings of 62 cents a share.
CME Group Inc.
) reported second-quarter 2012 operating earnings per share of 89
cents, outpacing the Zacks Consensus Estimate of 82 cents and the
year-ago quarter's earnings of 88 cents.
It appears that the dominant players of the exchange industry
have been marred by weak volumes and sluggish clearing and
transaction services, which also faltered the top line for both the
peers of NYSE. However, the exchange industry players are focusing
high on expense management in order to sustain earnings growth.
Currently, NYSE carries a Zacks Rank #3, implying a short-term
Hold rating although its long-term recommendation remains
CME GROUP INC (CME): Free Stock Analysis Report
NASDAQ OMX GRP (NDAQ): Free Stock Analysis
NYSE EURONEXT (NYX): Free Stock Analysis Report
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