NYSE Euronext (NYX), the U.S. exchange company that Deutsche Boerse AG (DB1) is planning to buy, declined in New York trading after saying second-quarter profit fell on lower revenue from European derivatives and U.S. equity trading.
Net income decreased 16 percent to $154 million from $184 million a year earlier, the New York-based company said today in a statement. Excluding some items, earnings dropped to 61 cents a share, exceeding the 60-cent average estimate of 11 analysts surveyed by Bloomberg.
The New York Stock Exchange operator’s planned purchase by Deutsche Boerse would create the world’s largest exchange operator, expanding NYSE Euronext’s revenue from European derivatives. Some of NYSE Euronext’s sales depend on the volume of shares that change hands each day, and trading on U.S. exchanges last quarter fell 9.6 percent from the first quarter, according to the daily average compiled by Bloomberg.
It “was a modestly disappointing quarter for NYSE Euronext,” Patrick O’Shaughnessy, a Chicago-based analyst with Raymond James Financial Inc., wrote in a note. “We had expected more momentum from the firm’s data center initiative while operating expenses continue to creep up.”
NYSE Euronext shares fell 4.9 percent to $31.40 at 4 p.m. in New York, the lowest level since Jan. 11. The stock had declined 6 percent since the company confirmed in February that it’s in talks about a merger with Deutsche Boerse. That drop compared with a 1.3 percent advance for the Bloomberg World Exchanges Index.
Net revenue from the company’s derivatives unit, which accounted for about 32 percent of the total, fell 5.8 percent to $213 million. Revenue from equity trading and listings increased 1.9 percent to $327 million, according to today’s statement.
Fixed operating expenses climbed 2.9 percent to $419 million, according to the statement today. Chief Financial Officer Michael Getlzeiler said today he is “confident” the company can reach its goal of costs of less than $1.65 billion for the full year on a constant dollar basis.
NYSE Amex sold almost 53 percent of its options market to seven brokers, winning regulatory approval for the plan last quarter.
“With the Amex deal now closed, NYSE Euronext will share profits from the Amex options business with its partners,” Rich Repetto, a New York-based analyst with Sandler O’Neill & Partners LP, wrote in a July 6 note.
The European Commission sent a survey last month with 165 questions to Deutsche Boerse rivals and customers, asking if the deal with NYSE Euronext would reduce competition and what effect it would have on access to market data. The EU’s antitrust agency set the Aug. 4 deadline to rule on the deal, and NYSE Euronext Chief Executive Officer Duncan Niederauer said today on a conference call that this was part of the first phase of the European regulators’ review.
“We expect to be notified by the competition authorities later this week that we will embark on a phase-two process,” Niederauer said on the call today. “My guess is that their focus will be on what conditions can be placed on us, not how to make or break the deal,” he added.
Deutsche Boerse, in Frankfurt, reported last week that second-quarter profit rose 11 percent as it cut costs, while Nasdaq OMX Group Inc. (NDAQ), NYSE Euronext’s smaller rival, posted quarterly earnings that beat analyst estimates, as acquisitions and listings services helped boost revenue.
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