Nasdaq OMX Group Rallies to One-Month High After Beating Profit Estimates
Nasdaq OMX Group Inc., the owner of the second-largest U.S. stock exchange, climbed to the highest level in more than a month after reporting second-quarter profit that beat analyst estimates as trading revenue rose.
The shares climbed 2.6 percent to $19.49 at 4 p.m. New York time, the highest price since June 16. They have dropped 1.7 percent in 2010, compared with an 8.7 percent slide in the FTSE/Mondo Visione Exchanges Index that tracks 18 companies.
Earnings excluding charges were 52 cents a share, compared with a 49-cent average forecast from 21 analysts surveyed by Bloomberg. The exchange operator has raised its focus on derivatives, technology and Europe while cutting some transaction fees to lure business as it faces heightened competition. Nasdaq, whose stock slumped 16 percent in the second quarter, has bought back $200 million of its shares since March and said today it increased the program by $100 million.
“The combination of the earnings beat and the upsized buyback program” drove today’s share gains, Alex Kramm, an analyst at UBS AG in New York, wrote in a note to clients. “Strong industry volumes clearly benefited the company in the quarter. However, positive pricing trends in the core U.S. cash equities business also contributed, which could mark a turning point for the company if sustainable.”
Operating Costs
Kramm has a “neutral” rating on the stock.
Operating expenses for 2010 will be $870 million to $885 million, including $60 million in one-time items, the New York- based owner of the Nasdaq Stock Market said in a statement today. Nasdaq took $16 million of charges “related to the divestiture of businesses, expenses associated with severance, merger and strategic initiatives, and other non-recurring items” in the quarter.
With the increase to $400 million for the share-buyback program, Nasdaq can still repurchase $200 million, according to the statement. Revenue excluding liquidity rebates, brokerage, clearance and exchange fees climbed 6.3 percent to $390 million, boosting net income by 39 percent to $96 million.
“Overall, a good, revenue-driven beat of consensus and incrementally positive buyback announcements should help Nasdaq shares outperform today,” Ed Ditmire, analyst at Macquarie Group Ltd., said in a note to clients. There is “likely follow- through if this leads to an upward bias to consensus.”
Market Share
The company’s U.S. equity market share slid to 22.8 percent last quarter from 23.9 percent in the first three months, according to the statement.
Separately today, Nasdaq, which also runs seven Nordic and Baltic bourses, agreed to buy Smarts Group, an Australian provider of market surveillance technology, to diversify revenue. The acquisition of Sydney-based Smarts will likely close in the third quarter. Terms of the purchase weren’t disclosed. Smarts is privately held and sells its technology to exchanges, regulators and brokers.
The exchange expects to make about $32 million of revenue from market technology in the third quarter, Chief Financial Officer Adena Friedman told analysts on a conference call today.
Deutsche Boerse AG, Europe’s largest exchange operator by market value, reported net income of 160.8 million euros ($208.8 million), more than the average of analyst estimates compiled by Bloomberg. NYSE Euronext, based in New York, issues its second- quarter report on Aug. 3. The average projection is for 59 cents a share, excluding some items.
To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net; Nandini Sukumar in London at nsukumar@bloomberg.net.
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