NASDAQ OMX Group Inc.’s (NDAQ) third-quarter
2012 operating earnings per share of 62 cents surpassed the Zacks
Consensus Estimate by a couple of cents. However, it fell shy of
the prior-year quarter’s earnings of 67 cents.
NASDAQ’s GAAP net income came in at $89 million or 52 cents per
share, lower than $110 million or 61 cents per share recorded in
the year-ago quarter. Results in the reported quarter included net
after-tax charge of $14 million or 10 cents per share, primarily
related to losses on sale of business, restructuring and other
items along with merger and strategic initiatives.
Excluding these, net income was $105 million compared with $121
million in the year-ago quarter. Meanwhile, total operating income,
on non-GAAP basis, slipped 11.3% year over year to $181
million.
Total net exchange revenues declined 6.2% year over year to $424
million, but exceeded the Zacks Consensus Estimate of $410 million.
The year-over-year downside was primarily attributable to
significantly weak revenue from market services, while growth in
issuer services and market technology revenues remained sluggish.
Additionally, cash equities and derivative continued to be feeble
based on lower industry trading volumes and unfavorable impact from
foreign exchange.
Segment wise, Market Services net
exchange revenues for the quarter dropped 10.3% from the year-ago
period to $269 million, based on slashed revenues, partially offset
by lower cost of revenues. Issuer
Services revenues for the reported quarter were $93
million, climbing 3.3% from the year-ago period on the back of
slightly higher revenue from global index group, global listing
services and corporate solutions. Market
technology revenues inched up to $47 million from $46
million in the year-ago quarter.
During the reported quarter, NASDAQ’s order intakes dipped to
$31 million from $35 million in the year-ago quarter. However,
total order value (the value of orders signed that have not been
recognized as revenue) strengthened to $523 million from $473
million in the prior-year quarter.
Meanwhile, on a non-GAAP basis, operating expenses marginally
reduced to $228 million from $232 million in the year-ago period,
primarily spurred by lower general and administrative as well as
depreciation and amortization expenses along with lower
compensation benefits.
These partially offset by incremental spending for professional
and contract services. On a GAAP basis, total operating expenses
dipped to $239 million from $241 million in the year-ago period.
Operating margin fell to 44% from 47% in the year-ago quarter, led
by a weak top line.
Financial Update
As of September 30, 2012, NASDAQ had cash and cash equivalents
of $438 million, down from $506 million at the end of 2011. Debt
obligations stood at $1.94 billion, down from $2.07 billion at
2011-end. Total assets decreased to $8.92 billion from $14.09
billion at 2011-end, while total equity climbed to $5.14 billion
from $4.99 billion during the same comparable period.
Capital Plan
On October 12, 2011, NASDAQ declared a new capital plan,
according to which the board of NASDAQ approved a new stock
repurchase program worth $300 million through open market
operations. Accordingly, NASDAQ bought back 2.2 million shares for
$50 million during the reported quarter.
Including this, the company has deployed $1.12 billion in share
repurchases since January 2009, thereby buying back 51.3 million
shares at an average price of $21.90. In the first nine months of
2012, the company has returned $225 million to its shareholders,
through buybacks and $43 million through dividend payouts.
Guidance
For 2012, NASDAQ management further lowered the operating
expense outlook to the range of $865–873 million from the prior
projection of $870–890 million. This excludes approximately $32–36
million of incremental expenses from new initiative spending, and
about $25–26 million related to BWise and NOS acquisitions.
However, including these charges, total operating expenses are
projected to be within $922–935 million, down from prior estimate
of $935–965 million.
NASDAQ reiterated that the new cost reduction plan aims to
generate cost savings at an annualized run rate of $50 million by
the end of 2012, with $25 million to be realized in 2012. This is
reflected in the company’s revised expense outlook, although it
excludes a restructuring expense related to this plan and voluntary
accommodation program.
Dividend
Concurrently, the board of NASDAQ declared a cash dividend of 13
cents per share, which will be paid on December 28, 2012 to the
shareholders of record as on December 14, 2012.
On September 28, 2012, NASDAQ paid a cash dividend of 13 cents
per share to the shareholders of record as on September 18, 2012.
The cash dividend was initiated on April 25, 2012, marking the
first dividend payment in the company’s history.
Others
During the reported quarter, NASDAQ processed 18 initial public
offerings (IPOs), at par with the year-ago period, while new
listings totaled 44 against 38 in the year-ago
quarter.
Meanwhile, NASDAQ’s arch-rival NYSE Euronext
Inc. (NYX) is slated to release its earnings results
before the market opens on November 6, 2012.
NASDAQ OMX GRP (NDAQ): Free Stock Analysis Report
NYSE EURONEXT (NYX): Free Stock Analysis Report
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