EARNINGS PREVIEW: Volume In Focus For US Exchanges In 1Q

TAKING THE PULSE: Amid the merger mania, the approaching earnings period stands as a reminder that beyond their status as targets, acquirers or national status symbols, exchanges are places where investors trade. The first quarter saw equities markets continue to suffer from weak volume, while derivatives activity took momentum from global inflation worries and a rise in oil prices fueled by geopolitical tensions in Africa and the Middle East. Most exchange companies are seen reporting double-digit percentage year-on-year revenue growth, according to Sandler O'Neill.

But once numbers are in, investors will be watching for Nasdaq and ICE's next move, after NYSE Euronext rejected their takeover proposal and reaffirmed its commitment to a merger with Germany's Deutsche Boerse. The suitors could sweeten their proposal or go hostile, taking an offer directly to NYSE's shareholders.

 
   COMPANIES TO WATCH: 
 
   Nasdaq OMX Group Inc. (NDAQ) - Reports April 20

Wall Street Expectations: Analysts most recently forecast earnings of 61 cents on $409 million in revenue. For the year-earlier period, the company had reported a profit of 28 cents a share, or 43 cents excluding items, on $360 million in revenue less liquidity rebates, brokerage clearance and exchange fees.

Key Issues: Nasdaq OMX has maintained a strong position in U.S. options trading that underpinned solid trading activity across most of the company's derivatives complex. Volumes on its Nordic stock platform rose while U.S. equities trade stayed relatively quiet, though Nasdaq OMX gained some market share. Observers see high stakes for Nasdaq OMX in the dealmaking drama: if it succeeds in taking over its longtime rival, Nasdaq could lead listings, options and share trade in the U.S. and Europe, but if NYSE completes its merger with Deutsche Boerse, Nasdaq would be eclipsed by a much-larger global competitor.

 
   CME Group Inc. (CME) - Reports April 28

Wall Street Expectations: Analysts polled by Thomson Reuters most recently forecast earnings of $4.19 a share on $826 million in revenue. The company had reported a year-earlier profit of $3.62 a share on $693.2 million in revenue.

Key Issues: The world's largest derivatives exchange operator by contract volume enjoyed historic activity levels in the quarter as political turmoil in Northern Africa and the Middle East roiled energy and fixed income markets, alongside the quake in Japan. CME has opted out of the current round of consolidation in favor of focusing on its current business, which is growing: volumes for the first quarter were up nearly one-fifth over year-ago levels, led by interest rate, energy and agricultural contracts.

 
   NYSE Euronext (NYX) - Reports May 3

Wall Street Expectations: Analysts most recently forecast earnings of 60 cents a share on $661 million in net revenue. For the prior-year period, the company had posted a 50-cent profit, or 54 cents excluding items, on $645 million in net revenue, which excludes transaction-based expenses.

Key Issues: Watch for NYSE Euronext to draw strength from its diversified model, with big jumps in U.S. stock options and European cash equities volumes countering slower progress in European derivatives and a continued slump in U.S. stock turnover. The company also launched a new U.S. futures venture that has gained early traction against CME Group, but intense focus will remain on the Big Board's future: NYSE still faces battles with regulators concerned with derivatives market competition and shareholders who see better value in Nasdaq and ICE's bid--not to mention a potential fight from its rejected suitors themselves, should they take their effort directly to NYSE shareholders.

 
   IntercontinentalExchange Inc. (ICE) - Reports May 4

Wall Street Expectations: Analysts most recently forecast earnings of $1.69 a share on $330 million in revenue. A year earlier, its earnings were $1.36 a share on $281.6 million in revenue.

Key Issues: ICE's upward trajectory in terms of trading was driven in the first quarter by tremendous volatility in energy prices, sparking double-digit percentage volume increases for its crude oil, gas oil and carbon futures markets. The company's business facilitating off-exchange energy trade is also seen trending toward a record for the quarter, according to Credit Suisse. ICE's entry to the contest for NYSE is opportunistic: carving out the U.K. futures business Liffe would dramatically expand ICE's financial futures offering and improve its chances of handling off-exchange swap trades.

 
   CBOE Holdings Inc. (CBOE) - Reports May 5

Wall Street Expectations: Analysts most recently forecast earnings of 34 cents a share on $121 million in revenue as the CBOE prepares to report its fourth quarter as a publicly traded company.

Key Issues: The operator of the Chicago Board Options Exchange is due benefits from a surge in equity derivatives trade for the quarter, with options clearer OCC notching March as the industry's busiest month on record. CBOE, which maintains exclusive rights to trade some of the most popular options products, has grown its share of other contracts as well, though fee changes aimed at boosting business have seen the company collect a bit less on some trades. A futures exchange and a new electronic options platform represent chances for organic growth, but observers have raised concerns that the wave of exchange consolidation could make CBOE a takeout target--or see it left behind.

(The Thomson Reuters estimates and year-earlier results may not be comparable because of one-time items and other adjustments.)

-By Matt Jarzemsky and Jacob Bunge, Dow Jones Newswires; 212-416-2240; matthew.jarzemsky@dowjones.com

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