Nasdaq OMX Beats Expectations as Profits Rise 68%

by: Proactive Investor

NASDAQ OMX (Nasdaq:NDAQ), the world's largest group of exchanges, reported a 68% rise in third quarter profits on Friday, despite overall lower industry trading volumes.

For the third quarter, the company reported net income of $101 million, or $0.50 per diluted share, versus $60 million, or $0.28 per diluted share, in Q3 2009.

Adjusted for one-time items, earnings per share increased to $0.50 from $0.42 in the prior year quarter. Net revenues grew 7% over last year's results to $372 million for the third quarter, due mainly to effects of currency exchanges, the company said.

According to Thomson Reuters, analysts were expecting earnings of $0.46 per share on $370 million in revenue.

The company's exchanges captured 22.3% of the U.S. equities market during the period, up slightly from 22.1% in the third quarter of 2009, and down from 22.8% in the second quarter this year. Its share of the U.S. stock trading was around the 30% level pre-recession.

To compensate for the drop in U.S. trading volumes, the company expanded its business in other areas to generate cash. Nasdaq OMX took the largest share of the U.S. options market during the third quarter, growing its total share to $28.8% from its two options exchanges.

European trading volumes also helped third quarter results, as European equities saw total volume of 17.4 million trades in the third quarter for a total value of EUR145.0 billion, compared to 12.5 million trades for EUR141.0 billion a year earlier.

Market service revenues, net exchange revenues, were up 8% to $249 million for the period, while transaction services grew 20% year-over-year to $168 million.

During the period, new listings totaled 45 compared to 35 last year, including two of the largest technology IPOs, Smart Technologies (Nasdaq:SMT) and NXP Semiconductors (Nasdaq:NXPI). Nasdaq OMX said it took 64% of total proceeds raised by IT companies on U.S. markets, totaling more than $1.6 billion.

The group also completed an aggressive $300 million buyback of shares under the $400 million authorized share repurchase program, representing 15.1 million shares. The board of directors has allowed an additional $150 million for the program, the company said.

By quarter's end, the company slashed operating expenses by 5% year-over-year. For 2010, it expects total operating expenses to be in the range of $880 to $890 million, including approximately $60 million in one-time costs.

In addition, Nasdaq OMX said it is on track in its goal to generate annual net revenues of $2 billion by the end of 2013.

Nasdaq OMX delivers trading, exchange and public company services across six continents, with approximately 3,600 listed companies. The company was up more than 2% on Friday morning, trading at $21.39 as of 10:28am ET.

Disclosure: No position