NYSE Euronext Profit Gains as Revenue Rises, Costs Fall

NYSE Euronext, the U.S. exchange operator being bought by Intercontinental Exchange Inc., reported first-quarter earnings that met analyst estimates as trading revenue increased and operating expenses declined.

Net income rose 45 percent to $126 million from $87 million a year earlier, the New York-based company said today in a statement. Earnings excluding some items were 57 cents a share, compared with the 56-cent mean estimate of analysts surveyed by Bloomberg. The 13 projections ranged from 53 cents to 58 cents.

Earnings at the 220-year-old NYSE rose for the first time in five quarters as the company reduced expenses. Intercontinental Exchange, a 12-year-old energy and commodity futures bourse, agreed in December to acquire NYSE, the owner of the largest American equity exchange, in an $8.2 billion deal set to close in the second half of this year.

“We see this expense-driven beat as a positive as NYSE is delivering on the one clear front within its control in a still uncertain trading environment,” Chris Allen, an analyst at Evercore Partners Inc. in New York, wrote in a report today.

Cutting Costs

NYSE shares were little changed at $38.66 as of 10:28 a.m. New York time today. They’ve gained 23 percent this year, almost twice the Bloomberg World Exchanges Index of 26 companies. Intercontinental Exchange, known as ICE, slipped less than 0.1 percent to $161.74. The company has risen 31 percent in 2013, the second most in the index.

NYSE has been cutting costs in a plan known as Project 14 meant to eliminate $250 million of expenses by the end of 2014, after European regulators barred the exchange from a planned merger with Deutsche Boerse AG in February 2012. Chief Financial Officer Michael Geltzeiler said on a conference call with analysts today that the company expects 2013 expenses to be lower than the $1.525 billion forecast.

Net revenue from derivatives increased 14 percent to $201 million as volume rose. Equity trading revenue, excluding regulatory fees and liquidity payments, fell 5.6 percent to $287 million, NYSE said today.

Operating expenses excluding merger costs, exit costs and some charges for fair value adjustment dropped 6.2 percent to $380 million.

Trading Volume

U.S. exchange-listed equity trading volume averaged 6.35 billion a day last quarter, down 6 percent from the first three months of 2012, data compiled by Bloomberg show. Options trading in the U.S. slowed to a daily average of 15.9 million contracts last year from a ninth-consecutive record of 18.1 million in 2011. It has increased to an average 16.6 million so far in 2013, data from the Chicago-based OCC show.

The company will discuss with Intercontinental Exchange plans for its NYSE Technologies unit when the merger is completed, Chief Executive Officer Duncan Niederauer said on the call today. The company has held talks with at least two parties over a sale of the unit, according to the Financial News yesterday, which cited two unidentified people with knowledge of the discussions.

“We have always conducted these partnership discussions,” Niederauer said today. “We are working with ICE to explore how we will leverage this important business post-merger.”

Nasdaq OMX Group Inc., NYSE’s smaller equity-exchange and U.S.-listings rival, on April 24 reported first-quarter earnings that exceeded estimates as revenue from information services and technology increased. Analysts project Atlanta-based Intercontinental Exchange will say tomorrow that earnings declined 3 percent, while Deutsche Boerse, based in Frankfurt, said yesterday that profit fell 26 percent as trading volume declined.

(Updates with analyst comment in fourth paragraph, today’s trading in fifth, CEO comment in 10th.)
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