Bloomberg News

Nasdaq OMX Posts Earnings That Exceed Analyst Estimates

July 27, 2011

(Updates today’s trading in fifth paragraph.)

July 27 (Bloomberg) -- Nasdaq OMX Group Inc., the second- largest U.S. equity exchange operator, posted second-quarter earnings that beat analyst estimates, as acquisitions and listings services helped boost revenue.

Excluding some items, earnings were 62 cents a share, exceeding the 60-cent average estimate of 18 analysts surveyed by Bloomberg, the New York-based company said in a statement today. Revenue excluding rebates and clearing and other fees rose 6.7 percent to $416 million.

Nasdaq OMX dropped its bid in May for larger rival NYSE Euronext’s equities, options and listings businesses, after the U.S. Department of Justice threatened to block it. While Nasdaq OMX’s share of American equities and options trading has been growing, the company will face a bigger competitor in Europe when Deutsche Boerse AG completes its $9.43 billion purchase of NYSE Euronext, set to close as early as the end of 2011.

“On an operating basis, Nasdaq continued to perform well,” Daniel Harris, a New York-based analyst at Goldman Sachs Group Inc., wrote in a note after the release. “We continue to see Nasdaq as an attractively valued way to gain exposure to capital markets activity.”

Stock Performance

The stock lost 3.3 percent to $23.50 at 4 p.m. New York time as the Standard & Poor’s 500 Index, the benchmark measure of U.S. shares, tumbled 2 percent for the biggest decline since June 1. It has fallen 10 percent since Nasdaq OMX and Atlanta’s IntercontinentalExchange Inc. dropped their joint unsolicited offer for NYSE Euronext on May 16. The company is trades for 10.3 times reported earnings, compared with the S&P 500’s multiple of 14.5, Bloomberg data show.

Revenue from market technology climbed 35 percent to $46 million from a year earlier, after the company completed its acquisition of Smarts Group Holdings, a provider of market surveillance programs for exchanges, regulators and brokers. Issuer services sales rose 8.1 percent from a year earlier to $93 million on higher demand from listed companies and as Europe’s contribution increased.

Nasdaq OMX’s share of U.S. equity trading rose to 22 percent last quarter from 19.2 percent in the first quarter, the company said today. Its share of the nation’s options trading also increased, rising to 28.9 percent from 28.7 percent in the first quarter, according to the statement.

Higher Expenses

Operating expenses for 2011 will be higher than projected in April, in a range of $910 million to $925 million, excluding about $40 million in one-time expenses, such as merger-related costs, the company forecast today. The increase is related to the weakening in the U.S. dollar, Chief Financial Officer Lee Shavel said on a conference call today.

While Nasdaq OMX dropped the NYSE Euronext bid, Chief Executive Officer Bob Greifeld said he does expect mergers and acquisitions to be part of the company’s future.

“As we evaluate current valuations in the marketplace today, including our own, we realize there are a number of external and internal alternatives for capital deployment that we need to consider in order to maximize returns for our shareholders,” Greifeld said on the call today.

NYSE Euronext, the largest U.S. exchange operator, is set to issue its second-quarter report on Aug. 2. The average analyst projection is for 60 cents a share in profit, according to data compiled by Bloomberg. Deutsche Boerse, based in Frankfurt, will post quarterly earnings of 1.09 euros per share on July 28, according to the average analyst estimate.

--Editors: Joanna Ossinger, Stephen Kleege

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.


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