By Jane Baird and Jonathan Spicer
LONDON/NEW YORK (Reuters) - NYSE Euronext
The New York Stock Exchange parent company remains under pressure from upstart stock-trading venues. But revenue from derivatives trading rose sharply in the fourth quarter, reflecting the company's aggressive push into more diverse areas of business with better profit margins.
NYSE Euronext shares rose before U.S. markets opened, and analysts pointed to surprisingly lower expenses and higher revenues in cash trading and listings for the strong results.
On the core basis watched by analysts, the company earned $151 million (97 million pounds), or 58 cents per share, for the quarter ended December 31, while market forecasts had averaged 48 cents, according to Thomson Reuters I/B/E/S.
Including one-time items, NYSE Euronext earned $172 million, or 66 cents per share, compared with a loss of $1.34 billion, or $5.06, in the same period a year before. The loss in that period was due to hefty one-time impairment charges.
The closely watched figure for fixed operating expenses dropped 9 percent to $432 million in the quarter, better than most expectations, as the company cut staff by 14 percent.
Net revenue fell 6 percent to $640 million, slightly better than Wall Street estimates.
Michael S. Geltzeiler, chief financial officer, said in a statement that the quarter reflected "increasing momentum in our business model and the continuing benefit of our various cost reduction programs."
"It appears to be a multiple beat from a variety of areas: revenue, expenses, above and below the operating income line," said Richard Repetto, analyst at Sandler O'Neill.
NYSE Euronext shares climbed 65 cents, or 2.9 percent, to $23.15 before the Big Board's opening bell. They were up 1.1 percent in Paris.
The company's London-based Liffe derivatives platform and its clearing businesses on both sides of the Atlantic are seen as increasingly vital to growth. Derivatives net trading revenue jumped 21 percent to $182 million in the period, reflecting investors' desire to hedge in uncertain markets.
Last year, NYSE Euronext sold stakes in its Amex Options market to outside firms, a move credited for boosting market share in the last few months. It now has the second-biggest share of options, with nearly a quarter of the market.
The exchange operator said in the statement it had completed the semi-mutualisation of its U.S. futures platform, NYSE Liffe U.S., and planned to do the same with the Amex options business.
"NYSE Euronext continues to make progress on its longer-term initiatives," Credit Suisse analyst Howard Chen wrote in a note. "All in all, we anticipate it could take a few more quarters before material earnings power realization and share price outperformance."
Revenue from cash equities trading shrank 38 percent to $139 million as volumes in the United States and Europe fell off from the crisis-driven level of activity seen at the end of 2008 and as net prices were reduced, the company said.
NYSE Euronext's U.S. equities market share was 28 percent in the fourth quarter, down from 34 percent a year ago. It held relatively steady through the second half of last year, but dropped to 26.2 percent in January.
The company reported $44 million in merger expenses and exit costs for the quarter, including the acquisition of NYFIX, a designer of trading systems.
Before Tuesday, NYSE Euronext shares were down 11 percent so far this year. They tumbled last month when U.S. President Obama announced proposals to curb proprietary trading at banks.
Rival NASDAQ OMX Group Inc
(Reporting by Jane Baird in London and Jonathan Spicer in New York; Editing by Dan Lalor, Greg Mahlich and Gerald E. McCormick)
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