EARNINGS PREVIEW: Exchanges See Merger Activity, Volume Troubles In 2Q
July 21 2011 - 1:03PM
Dow Jones News
TAKING THE PULSE: An increased appetite for mergers has shaken
up the exchange sector, highlighted by NYSE Euronext's (NYX)
pending blockbuster combination with Deutsche Boerse AG (DB1.XE),
while Nasdaq OMX (NDAQ) is left to consider other possible merger
partners following its own failed bid for NYSE.
Meanwhile, volume spikes seen during the "flash crash" in May
2010 will create tough year-over-year volume comparisons for the
exchanges. Further, Raymond James analysts note the second quarter
witnessed the lowest quarterly average daily volume for U.S.
equities since the fourth quarter of 2007, placing greater emphasis
on exchange groups' push to diversify through derivatives.
COMPANIES TO WATCH:
Nasdaq OMX Group Inc. (NDAQ) - reports July 27
Wall Street Expectations: Analysts most recently forecast
earnings of 60 cents a share on revenue of $413 million, according
to Thomson Reuters. Nasdaq reported an adjusted per-share profit of
52 cents on $390 million in revenue in the same period a year
ago.
Key Issues: After abandoning its pursuit of rival NYSE Euronext
in May, Nasdaq appears to be still on the hunt for a merger.
Earlier this month, The Wall Street Journal reported Nasdaq was
considering its second approach to the London Stock Exchange in
five years, after LSE's own proposed tie-up with Canada's TMX Group
Inc. (X.T) fell through in June. Nasdaq also has entered a bid for
London-based clearing firm LCH.Clearnet. LCH.Clearnet is still
considering that offer. Meanwhile, Nasdaq has retained its
leadership in U.S. options trade and drawn more investors to its
European stock markets.
CME Group Inc. (CME) - reports July 28
Wall Street Expectations: Analysts most recently forecast
earnings per share of $4.17 on revenue of $821 million. The company
reported an adjusted per-share profit of $4.43 on $813.9 million in
revenue in the year-ago period.
Key Issues: Festering debt problems facing euro-zone nations
lured more firms to hedge interest-rate risk in CME's futures
markets over the second quarter, helping the world's largest
futures exchange top levels seen amid the flash crash of last
year's second quarter.
Rising trade in commodities and metals contracts stacked up
against was offset by an 18% drop in stock-index futures trading
and a dip in forex contracts, where CME faces a new competitor in
IntercontinentalExchange Inc. (ICE). CME executives may field more
questions on consolidation this quarter, but the company is likely
to reiterate a preference for organic growth--which is looking more
like a wise choice following several high-profile exchange deal
failures.
NYSE Euronext (NYX) - reports Aug. 2
Wall Street Expectations: Analysts most recently forecast
earnings per share of 60 cents on revenue of $653 million. The
company reported an adjusted per-share profit of 64 cents on $654
million in net revenue in the same quarter a year ago.
Key Issues: With shareholder support for its tie-up with
Deutsche Boerse now in hand, NYSE is turning its focus to what many
expect will be a lengthy regulatory review process. Meanwhile a
protracted slowdown in stock trade in both the U.S. and Europe
means that the Big Board parent will rely on its U.S. options and
U.K. futures divisions to support second-quarter results. A rise in
volatility over the quarter drove more investors to hedge with
options contracts, while futures volumes climbed from first-quarter
levels.
IntercontinentalExchange Inc. (ICE) - reports Aug. 3
Wall Street Expectations: Analysts most recently forecast
earnings of $1.66 a share on revenue of $323 million. The company
reported an adjusted per-share profit of $1.51 on $296.2 million in
revenue a year earlier.
Key Issues: Growth in the energy-focused derivatives markets run
by ICE continued to outpace peers over the second quarter, with
European trade rising an estimated 10% from year-ago levels and
leading growth in the company's smaller U.S. markets in soft
commodities and currencies.
Some analysts have flagged a decline in outstanding crude oil
trades as a potential trouble sign for ICE's most popular market.
Watch for executives to address the issue, as well as feelings
toward dealmaking after regulators blocked ICE's and Nasdaq's joint
bid for NYSE Euronext. This month ICE took a 12% stake in a
Brazilian trade-clearing unit, underscoring ICE's efforts to
further expand into overseas commodity markets.
CBOE Holdings Inc. (CBOE) - reports Aug. 4
Wall Street Expectations: Analysts most recently forecast
earnings of 33 cents a share on revenue of $119 million. The
company reported a per-share profit of 27 cents on $112.6 million
in revenue in the year-ago quarter.
Key Issues: Strong trade in the Chicago Board Options Exchange's
stock-index options franchise has helped as rivals continue to chip
away at CBOE's business in options on individual stocks and
exchange-traded funds. The company's new all-electronic C2 exchange
has drawn more business, but CBOE's overall equity option market
share fell to about 22% from 26.5% a year ago. As the smallest
publicly traded exchange company in the U.S., CBOE continues to be
seen as a potential acquisition candidate, with its largest
investor in June estimating that CBOE could fetch $45 a share if it
is bought.
(The Thomson Reuters estimate and year-ago figures may not be
comparable due to one-time items and other adjustments.)
-By Mia Lamar and Jacob Bunge, Dow Jones Newswires;
212-416-3207; mia.lamar@dowjones.com
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