NYSE Euronext, Inc.
’s (NYX) first quarter operating earnings per share of 54 cents came in line with the Zacks Consensus Estimate. However, earnings was substantially ahead of 43 cents per share recorded in the year-ago quarter but came in lower than 58 cents in the prior quarter. 

Results reflect increasing momentum in the business model, particularly, its derivative business and the continuing benefit from the various cost reduction programs that was partially offset by weakness in cash trading markets. The company also benefited from the acquisition of NYFIX Marketplace that completed one full quarter, post acquisition. Accordingly, operating net income increased to $140 million compared to $112 million in the year-ago quarter.
NYSE reported GAAP net income of $125 million or 50 cents per share as compared to $106 million or 40 cents per share for the prior year quarter. These include the impact of pre-tax merger expenses and exit costs of $13 million in the reported quarter and $23 million in the year-ago quarter.
Excluding activity assessment fees, gross revenues declined 5.2% year over year but increased 6.8% from the prior quarter to $1.083 billion in the reported quarter of 2010. Net revenues (defined as gross revenues less direct transaction costs consisting of Section 31 fees, liquidity payments and routing and clearing fees) were $645 million, up from $605 million in the prior year quarter and $640 million in the prior quarter. 

Revenue from derivatives (up 51% year over year) and information service and technology solutions (up 33% year over year) was partially offset by decline in cash trading and listings (down 225 year over year) due to price reductions and lower trading volumes.
Fixed operating expenses increased to $427 million from $422 million in the prior year quarter but were down from $431 million in the prior quarter. The effective tax rate was 27.5%, almost in line with management’s guidance for 2010. At Mar 31, 2010, total headcount of NYSE was 3,216 down 4.5% and 13.3% from Dec 31, 2009 and Mar 31, 2009, respectively.
At Mar 31, 2010, total debt declined $103 million from the prior quarter to $2.7 billion and consists of $2.1 billion in long-term debt and $0.6 billion in short-term debt. At the end of the reported quarter of 2010, cash and cash equivalents, investments and other securities were $0.4 billion and net debt was $2.3 billion.
Business Update

During the quarter, NYSE completed the sale of its ownership in the National Stock Exchange of India for $175 million. These gross proceeds are expected to be utilized to repay debt of the company.
As well, NYSE expects to launch New York Portfolio Clearing, post regulatory approval, in the third quarter of 2010. Besides, the company also projects to launch its interest rate futures contracts on NYSE Liffe U.S. platform and new data centers in the second-half of 2010. These initiatives are expected to drive new revenue opportunities for the company’s Technology Solutions business.
Dividend Update
On Apr 29, 2010, the board of NYSE declared a quarterly cash dividend of 30 cents for the second quarter of 2010, which will be paid on June 30, 2010 to shareholders of record as on June 15, 2010.
Read the full analyst report on “NYX”
Zacks Investment Research