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Bear of the Day

NYSE Euronext, Inc.'s (NYX) third quarter earnings breezed past the Zacks Consensus Estimate but plunged year over year based on weak volumes and pricing across trading venues, which led to a reduced top line and lower operating margin. A low cash position and high debt raised the concerns of rating agencies.

NYSE has a bigger debt burden compared to its prime peers, which poses a competitive threat to the fundamental growth of the company. Higher debt and lower working capital in the first half of 2012 also impelled ratings agency S&P to downgrade its outlook to negative from stable, in August 2012.

Our six-month target price of $22.00 equates to about 11.7x our earnings estimate for 2012. With an annual dividend of $1.20, this price target implies a negative total return of 6.9% over that period. This is consistent with our long-term Underperform recommendation on the shares.

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