On Sep 26, we reiterated our recommendation on
NYSE Euronext Inc.
) at Neutral based on its disciplined expense management and
improvement in trading volumes. However, intense competition,
unfavorable currency and weakness in European markets partially
offset the company's growth.
Why the Retention?
Estimates for NYSE have remained steady since the company
reported its second-quarter 2013 results on Jul 30. The company's
earnings per share of 63 cents and revenues of $611 million
exceeded the Zacks Consensus Estimate by 8.6% and 1.5%,
Moreover, both top and bottom line surpassed the year-ago
results by 23.5% and 1.5%, respectively, based on improved
, transaction and clearing fees along with higher derivative
revenues. In addition, strict expense control supported growth in
operating margins and cash flow. However, technology service and
listing revenues remained weak.
Following the release of the second-quarter results, the Zacks
Consensus Estimate for 2013 edged up a penny to $2.35 per share
in the last 60 days. However, the Zacks Consensus Estimate for
2014 remained intact at $2.85 a share over the same period. With
the Zacks Consensus Estimate for both 2013 and 2014 showing no
clear directional pressure on the stock in the near term, the
company now has a Zacks Rank #3 (Hold).
However, the Most Accurate Estimate for NYSE's 2013 earnings
stands at $26.08 a share, resulting in an
With most of the regulatory approvals received and compliances
dealt with, NYSE's merger with
) is nearing completion and is likely to boost efficiencies,
making it one of the strongest exchanges in the world. On the
other hand, NYSE has been persistently making efforts to grow
organically. Simultaneously, efforts to reduce debt and operating
expenses, while also generating cost synergies from its business
initiatives score well with ratings agencies and add to NYSE's
However, sluggish growth trend in trading volumes in both the
U.S. and Europeis expected to continue in the upcoming quarters
as well, given the volatility in interest rates, inflation and
changes in price levels of contracts, as well as intense product
and price competition. Additionally, the ongoing regulatory
amendments across the U.S. and Europe, to make markets more
competitive and negate systematic risks,limit the future growth
Other Financial Stocks That Warrant a Look
While we remain on the sidelines for NYSE, other stocks in the
financial sector that are outperforming include
Official Payments Holdings Inc.
Total System Services Inc.
). Both these stocks carry a Zacks Rank #2 (Buy).
INTERCONTINENTL (ICE): Free Stock Analysis
NYSE EURONEXT (NYX): Free Stock Analysis
OFFICIAL PAYMNT (OPAY): Get Free Report
TOTAL SYS SVC (TSS): Free Stock Analysis
To read this article on Zacks.com click here.