NYSE Euronext Q3 Profit Falls, Yet Tops View; To Sell "significant" Equity Interest In NYSE Liffe US - Update

(RTTNews) - Diverse exchange group NYSE Euronext Inc. (NYX | Quote | Chart | News | PowerRating) reported a decline in third-quarter profit, hurt by a fall in revenues due to lower overall trading volumes and pricing changes. On an adjusted basis, earnings dropped year-over-year, yet topped the Street view. Separately, NYSE Euronext said it would sell a significant equity interest in its U.S. futures exchange, NYSE Liffe U.S., to several leading banks and liquidity providers.

For the third quarter, net income attributable to NYSE Euronext was $125 million or $0.48 per share, compared to $174 million or $0.66 per share last year.

The recent quarter results include the impact from merger expenses and exit costs, the impact of the disposition of Hugin Group B.V., the sale of investment in BM&F Bovespa and a fair value adjustment to investment in BIDS Holdings.

On a pro forma non-GAAP basis, net income attributable to NYSE Euronext was $138 million or $0.53 per share, lower than $192 million or $0.72 per share a year ago. On average, 18 analysts polled by Thomson Reuters expected the company to earn $0.46 per share for the quarter. Analysts' estimates typically exclude special items.

On a reported basis, total revenues declined to $1.16 billion from $1.20 billion in the prior year quarter.

On a pro forma non-GAAP basis, gross revenues for the quarter, excluding activity assessment fees, decreased to $1.05 billion from $1.16 billion last year, while net revenues declined to $624 million from prior year's $724 million. Eight analysts had consensus revenue estimate of $1.08 billion for the quarter.

Third quarter 2009 gross revenues were negatively impacted by a decline in global cash equities volumes coupled with pricing changes across European and U.S. cash businesses. The latest quarter net revenue includes $30 million negative impact attributable to foreign currency fluctuations.

In the third quarter, revenues from Activity assessment, on a reported basis, rose to $115 million from last year's $46 million, and cash trading revenues dropped to $516 million from $634 million last year. Revenues from derivatives trading and clearing decreased to $226 million from $229 million a year ago, and market data revenues declined to $102 million from $112 million last year. Revenues from Listing edged up to $100 million from $98 million a year ago.

Total pro forma non-GAAP revenues from US Operations fell to $689 million from last year's $718 million, while net revenues declined to $293 million from $317 million a year ago. In the European operations, total pro forma non-GAAP revenues fell to $365 million from $441 million last year, and net revenues declined to $337 million from $407 million a year earlier.

During the quarter, U.S. Cash Equities average daily volume, or ADV, was 2.9 billion shares for NYSE Group across all U.S. equity markets, down 19.2% from the previous year. European Cash Equities ADV fell 15% to 1.3 million transactions, and NYSE Group matched exchange-traded funds ADV increased 29.3% from last year.

In the quarter, U.S. equity options ADV was 2.6 million contracts, a 46.3% increase from the previous year, and European derivatives products ADV was 3.8 million contracts, 1.4% above the 3.8 million contracts recorded in the third quarter of 2008.

For the nine-month period, the company posted net income attributable to NYSE Euronext of $47 million or $0.18 per share versus $600 million or $2.26 per share a year ago.

Pro forma non-GAAP net income attributable to NYSE Euronext was $382 million or $1.47 per share, down from $626 million or $2.36 per share in the comparable period.

Year-to-date, total revenue, on a reported basis, grew to $3.56 billion from $3.49 billion, while total pro forma non-GAAP revenues edged down to $3.28 billion from $3.3 billion in the same period last year.

Looking ahead, NYSE Euronext anticipates fourth quarter fixed operating expenses to be considerably below prior year levels and expects to end the year below full-year 2009 fixed cost guidance of $1.728 billion.

Duncan Niederauer, CEO, NYSE Euronext, said, "We continue to see stabilization in our core businesses and significant progress on our new initiatives."

In addition, NYSE Euronext announced the signing of a binding agreement with several leading global banks and liquidity providers: Citadel Securities, GETCO, Goldman Sachs, Morgan Stanley, and UBS, to sell a significant equity interest in NYSE Liffe U.S., the U.S. futures exchange of NYSE Euronext.

NYSE Euronext said it will remain the largest shareholder in the entity, which will bring substantial competitive and operational benefits to the marketplace.

NYSE Euronext will continue to manage the day-to-day operations of NYSE Liffe U.S., which will operate under the supervision of a separate Board of Directors, chaired by Jim McNulty and Chief Executive Officer Thomas Callahan. The transaction is expected to close shortly, subject to regulatory review.

NYX closed Thursday's regular trading session at $27.58. In the past 52 weeks, shares have been trading in a range of $14.52 - $31.93.

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