NYSE Euronext (NYX), the U.S. exchange company that Deutsche Boerse AG (DB1) is planning to buy, reported third-quarter profit that exceeded estimates as the company trimmed costs and market volatility boosted trading volumes.
Net income gained 56 percent to $200 million from $128 million a year earlier, the New York-based company said today in a statement. Excluding some items, earnings rose to 71 cents a share, compared with the 70-cent average estimate of 14 analysts surveyed by Bloomberg.
NYSE said it’s “confident” it will meet previously announced full-year 2011 expense guidance of less than $1.650 billion. Other operating expenses, excluding merger expenses and exit costs, fell 1 percent to $416 million in the third quarter of 2011 from the year-earlier period.
“NYSE reports a third-quarter expense-driven beat,” Richard Repetto, an analyst at New York-based Sandler O’Neill & Partners LP, said in a note to investors. “Full year expenses expected to be $1.68 billion, below our expectation of $1.7 billion.” He rates NYSE a “buy.”
Stock trading volume climbed in the U.S. and Europe in the third quarter as investors increased activity, speculating whether the European debt crisis was spreading and the U.S. was on the brink of a recession. Equity trading and listings accounted for about half of NYSE Euronext’s sales last year. The company has been expanding into derivatives and technology to broaden its revenue sources, part of the reason for the Deutsche Boerse deal, which would create the world’s largest exchange.
The shares rose 6.1 percent to $27.08 today in New York, the most since Oct. 10. They tumbled 32 percent last quarter, the second-biggest drop among the 25 members of the Bloomberg World Exchanges Index behind that of Hellenic Exchanges SA.
The decline helped drag down the value of the all-stock Deutsche Boerse takeover to $6.7 billion from $9.5 billion when it was announced in February, data compiled by Bloomberg show. While shareholders have approved the merger, it still has to pass European regulators.
The companies have until Nov. 17 to offer concessions that may appease the concerns of European Union regulators about their proposed deal, according to three people familiar with the situation. Concessions would have to eliminate EU concerns that the takeover could monopolize derivatives trading in Europe, according to a separate person familiar with an antitrust complaint sent to the exchanges last month.
“At some point the logic of the combination would not hold together if we are asked to give up too much,” Chief Executive Officer Duncan Niederauer said on a conference call today. “This is not where we are right now,” he said. “As we go through the final stages of this process, the industrial logic of the merger will not be compromised.”
Meetings with European regulators will start again next week in Brussels, Niederauer added.
Last week, NYSE Euronext and Deutsche Boerse each said they plan to buy back some of their stock before the end of the year, when the deal is set to close. NYSE Euronext will repurchase $100 million of its own shares through the end of the year, and Deutsche Boerse will buy 100 million euros ($138 million) of its stock. They plan to coordinate the programs so that NYSE shareholders will still own 40 percent of the combined company.
Deutsche Boerse third-quarter earnings before interest and taxes excluding certain items climbed 46 percent to 356.4 million euros, while revenue rose 20 percent to 604.7 million euros. Nasdaq OMX Group Inc. (NDAQ), NYSE Euronext’s smaller competitor, had quarterly earnings that matched analyst estimates, according to a report on Oct. 26.
Equity trading volume on U.S. exchanges surged 14 percent in the third quarter from a year earlier, Bloomberg data show. Trading surged in Germany as the DAX Index tumbled 25 percent during the quarter, the most since 2002. Average daily volume for companies in the measure more than doubled from a year earlier, according to data compiled by Bloomberg.