posted a jump in second-quarter income but still missed the analyst targets. The results sent the stock tumbling 12.5% Friday morning.
The volatile markets during the quarter drove trading volumes to record levels and boosted the company's net income to $200 million, or 75 cents a share, excluding merger expenses. That's a 17% increase over the same period last year, but 3 cents shy of the 78 cents that analysts surveyed by Thomson Reuters expected.
Including the merger items, net income would have come in at $195 million, or 73 cents a share. Revenue rose to $1.15 billion from $1.08 billion. Analysts were looking for $806.85 million.
NYSE Euronext pointed out that American Stock Exchange members approved the proposed merger and the deal is planned to close in the third quarter of 2008. The merger is expected to operate at a loss for the remainder of the year, but then deliver $100 million in savings and be accretive by the end of 2009.
"Beyond the cost saves, we are also committed to investing in growth, which includes broadening our product and service portfolio in both core businesses and new ventures. Our capital allocation will be appropriately balanced between investing in our future and returning capital to our shareholders, as evidenced by our $1 billion stock repurchase program," said NYSE Euronext's CFO, Michael Geltzeiler, in a statement.
The share-repurchase program will begin following the close of the transaction. The company also announced a 30-cent quarterly dividend.
Volumes were up in most products. During the second quarter, the European cash markets enjoyed record trading volume of 88 million trades, a rise of 17% over last year, while the U.S. cash markets in June traded more volume than any other U.S. exchange. The market share of matched transactions for NYSE-listed securities was 47% vs.
share of 22%. NYSE Arca Options volume increased 38% quarter-over-quarter, and year-to-date the exchange remained the world's leader with roughly 4,100 listed issuers.
Investors, however, were unhappy with the results selling off shares. The stock was falling $5.90, to $41.34.
Goldman Sachs analyst Daniel Harris wasn't thrilled and wrote, "Not a good follow-up to what had been a very positive first-quarter result. The issue is how management will position expense management going forward, including the impact of the recent voluntary resignation program, which was partially responsible for $38 million in severance payments during the quarter."
But Octavio Marenzi, head of Celent Research, was more positive, saying: "NYSE Euronext's results are strong and underscore the fact that exchanges can flourish in difficult markets, as long as volumes remain high. The recent volatility we have seen in the markets has driven high volumes, and these high volumes show no signs of abating in the near future."