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NYSE Euronext, Inc. (NYX)

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We are downgrading our recommendation on NYSE Euronext, Inc. (NYX) to Underperform based on weak volumes and pricing across trading venues, which led to a reduced top line and lower operating margin. Its second quarter earnings beat the Zacks Consensus Estimate by a penny but faltered year over year.

Meanwhile, the recent termination of the European launch of a new electronic retail derivatives market, which was slated to launch in the first quarter of 2013 has also eliminated a long-term revenue potential. We do not expect any radical growth in the top-line unless the current market recovery provides resonance to liquidity and credit quality.

Our six-month target price of $22.00 equates to about 11.3x our earnings estimate for 2012. With an annual dividend of $1.20, this price target implies a negative total return of 8.3% over that period. This is consistent with our long-term Underperform recommendation on the shares.

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