Bloomberg News

Nasdaq OMX Earnings Beat Estimates on Revenue, Buybacks

February 01, 2012

(Updates today’s trading in fifth paragraph.)

Feb. 1 (Bloomberg) -- Nasdaq OMX Group Inc., the second- largest U.S. equity exchange operator, posted fourth-quarter earnings that beat analyst estimates as revenue climbed and the company bought back $100 million in shares.

Earnings were 63 cents a share excluding some items such as debt refinancing and a charge for an investment in Dubai Financial Market, exceeding the 61-cent average estimate of 19 analysts surveyed by Bloomberg, the New York-based company said in a statement today. Revenue excluding rebates, clearing and other fees rose 5.5 percent to $422 million, while net income according to generally accepted accounting principles fell 40 percent to $81 million.

Nasdaq OMX’s shares have beaten NYSE Euronext’s since the owner of the New York Stock Exchange announced a year ago that it would merge with Deutsche Boerse AG. The European Commission blocked the NYSE-Deutsche Boerse deal today, after NYSE stock retreated 21 percent since the companies disclosed their talks. Nasdaq OMX had fallen 4.2 percent since Feb. 8, 2011.

“We continue to like this story given the company’s balanced top-line growth, lower relative leverage to transaction volumes moving forward, and potential earnings support from the share buyback,” Chris Allen, a New York-based analyst with Evercore Partners LP, wrote in a note today.

The stock advanced less than 0.1 percent to $24.77 today. The shares advanced 5.9 percent during the October-to-December quarter, compared with a 4.3 percent rally for the Bloomberg World Exchanges Index of 25 companies worldwide.

Stock Buybacks

Nasdaq OMX spent about $100 million to buy back 3.98 million shares at an average price of $25.10, according to today’s release. The company plans to finish the remainder of its $300 million repurchase plan this year and will begin considering a dividend toward the end of it, Greifeld said on a conference call today.

Total operating expenses in 2012 will be $955 million to $985 million, including one-time new initiative spending, Nasdaq OMX said today.

NYSE Euronext, the largest U.S. exchange operator, is scheduled to issue its fourth-quarter report on Feb. 10. The average analyst projection is for 50 cents a share in profit, compared with 46 cents in the year-earlier period, according to data compiled by Bloomberg. Deutsche Boerse AG, based in Frankfurt, will post quarterly earnings on Feb. 13.

European Veto

European regulators today vetoed NYSE Euronext’s plan to merge with Deutsche Boerse after concluding that the proposal, which would create the world’s largest exchange, would hurt competition. The deal would have put 90 percent of Europe’s exchange-traded derivatives in the hands of one company. Nasdaq OMX joined with IntercontinentalExchange Inc. in April to make a hostile bid for NYSE Euronext. U.S. regulators rejected the deal, citing antitrust concerns over the listings businesses.

The rejections won’t prevent more mergers among exchange companies, Greifeld said today, adding that Nasdaq OMX is more focused on organic growth and smaller, “bolt-on” acquisitions.

“We do not believe that this ruling will preclude other large exchange deals from happening,” he said on a call. “Our rejection by the DOJ and today’s rejection by the EU competition committee certainly send a clear message that transactions that result in over 90 percent market share in a predefined market is highly suspect, but there is a compelling industrial logic of combining operations and technology of non-overlapping exchanges, and that will happen in the future.”

--Editors: Joanna Ossinger, Nick Baker

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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