NYSE Beats, Growth Sluggish - Analyst Blog


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NYSE Euronext Inc. 's ( NYX ) fourth-quarter 2011 operating earnings per share of 50 cents came in a penny ahead of the Zacks Consensus Estimate and slightly higher than 46 cents recorded in the year-ago quarter. Consequently, operating net income climbed 12.8% year over year to $212 million from $188 million in the year-ago quarter.

NYSE reported GAAP net income of $110 million or 43 cents per share as compared with $135 million or 51 cents per share in the prior-year quarter. These include the impact of pre-tax merger expenses and exit costs of $46 million related to Deutsche Boerse versus $18 million in the year-ago quarter and BlueNext tax settlement charge of $42 million. These were partially offset by tax benefit of $47 million in the reported quarter.

Gross revenues crawled up 0.9% year over year to $1.05 billion 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) were $628 million, edging up 2.4% from $613 million in the prior-year quarter and the Zacks Consensus Estimate of $631 million.

The improved performance was primarily spurred by higher technology service revenue that escalated 15.9% to $95 million, listing revenue that climbed 4.7% to $112 million, and other revenue also enhanced by 16.7% year over year to $56 million. However, these were offset by transaction and clearing fees that inched down 1.7% year over year to $701 million and market data revenue that declined 5.3% year over year to $90 million.

Revenue from derivatives also dipped 1.1% year over year to $186 million. Nevertheless, revenue growth was injected by information service and technology solutions (up 11.4% year over year to $127 million) and cash trading and listings (up 1.6% year over year to $315 million).

Overall, top-line results reflected declining volumes in European derivatives and US cash trading along with unfavorable currency fluctuations, which was partially cushioned by modest growth in US equity options and higher average revenue per contract.

Alongside, fixed operating expenses escalated 13.8% year over year to $504 million. As a result, operating margin improved to 34% from 31% in the year-ago quarter. At the end of 2011, total headcount at NYSE was 3,077, marginally up from 3,074 as of September 30, 2011 and 4% from December 31, 2010. The effective tax rate was 25.75% as compared with 26.50% in the year-ago quarter and in line with management's guidance for 2011.

Full-Year 2011 Highlights

For full-year 2011, NYSE recorded operating earnings of $1.0 billion or $2.48 per share against $833 million or $2.09 per share in 2010. This, however, came in slightly below the Zacks Consensus Estimate of $2.51 per share.

Besides, GAAP net income increased to $619 million or $2.36 per share as opposed to $577 million or $2.20 per share in 2010.

Gross revenues edged up 3% over 2010 to $4.55 billion in 2011. Meanwhile, net revenues were $2.67 billion, rising 6% from $2.51 billion in 2010 but marginally lagged the Zacks Consensus Estimate of $2.68 billion. Total operating expenses inched up 3.2% year over year to $1.82 billion, while operating margin improved to 38% from 33% in 2010.

Moreover, in 2011, NYSE raised $33.5 billion in total global proceeds from 104 initial public offerings (IPOs) on its European and US markets, more than any global exchange group.

Financial Update

As of December 31, 2011, NYSE's total debt declined $0.3 million from 2010 end to $2.1 billion. At the end of 2011, cash and cash equivalents, investments and other securities were $0.4 billion while net debt was $1.7 billion.

Total capital expenditure declined to $54 million from $61 million recorded in the year-ago quarter. The company expended $170 million in 2011, down by 44% from $305 million in 2010, and in line with management's guidance of below $200 million. No shares were repurchased during the reported quarter, given the collapse of a merger with Deutsche Boerse.

As a result of strong growth in adjusted EBITDA, lower capital expenditures and continued deleveraging, NYSE's debt-to-EBITDA ratio improved to 1.6x from 2.2x recorded at the end of 2010, lowest level since the inception of NYSE in April 2007.

Stock Repurchase Update

As announced in October 2011, NYSE bought back 3.7 million shares during the reported quarter, at an average price of $26.96 per share, for $100 million.

Thus, the company has resumed its $1.0 billion share buy back plan, which was sanctioned in March 2008 but shelved in the fourth quarter of 2008, within which the company had already bought back shares worth $350 million.


While NYSE terminated its proposed merger with Deutsche Boerse recently on regulatory snags, management is expected to declare a two-year target plan in April this year.  This plan is projected to drive accelerated earnings growth through a blend of top-line growth initiatives, which includes diversification of growth into non-core space of information and technology.

Additionally, NYSE looks forward to a disciplined cost management and healthy capital deployment. While the outlook for trading volumes and currencies remains cautious in the near term, the company believes a modest improvement in the operating environment should initiate progress.

Dividend Update

Concurrently, the board of NYSE declared a regular quarterly dividend of 30 cents per share, which is payable on March 30, 2012, to the shareholders of record as on March 15, 2012.

Furthermore, on December 30, 2011, NYSE paid a quarterly cash dividend of 30 cents to shareholders of record as on December 15, 2011.

Peer Take

Early this month, NYSE's arch-rival Nasdaq OMX Group Inc. ( NDAQ ) reported its fourth-quarter 2011 operating earnings per share of 63 cents, which came in a nickel below the Zacks Consensus Estimate. However, results were modestly ahead of 55 cents in the prior-year quarter, based on lower share count.

Besides, early this week, IntercontinentalExchange Inc. ( ICE ) reported fourth-quarter 2011 operating earnings of $1.76 per share, which were significantly ahead of the Zacks Consensus Estimate of $1.68 per share and $1.35 per share reported in the year-ago period.

INTERCONTINENTL ( ICE ): Free Stock Analysis Report
NASDAQ OMX GRP ( NDAQ ): Free Stock Analysis Report
NYSE EURONEXT ( NYX ): Free Stock Analysis Report
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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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