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Nasdaq Posts Strong Q4 Earnings, Revs Up

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Nasdaq OMX Group Inc.’s (NDAQ - Free Report) fourth-quarter 2013 operating earnings per share of 69 cents modestly surpassed the Zacks Consensus Estimate of 66 cents as well as the prior-year quarter number of 64 cents.

Nasdaq’s GAAP net income was $141 million or 81 cents per share, higher than $85 million or 66 cents per share recorded in the year-ago quarter. Excluding extraordinary items, operating net income was $119 million compared with $108 million in the year-ago quarter.

Total net exchange revenues increased 23.2% year over year to $520 million, also exceeding the Zacks Consensus Estimate of $517 million.On a constant currency basis and excluding acquisitions, revenues rose 5% in the reported quarter.

The improvement was primarily attributable to growth in the non-trading business segments. Non-transaction based revenues were accounted for 73% of total net revenue and grew 27% from the prior-year quarter. Theacquisitions of Thomson Reuters' IR, PR and Multimedia businesses and the eSpeed electronic fixed income platform were also accretive to the financials.

Segment wise, Market Services net exchange revenues for the quarter upped 9.1% from the year-ago period to $204 million, based on higher revenues and lower cost of revenues. Listing Services revenues were a million higher $58 million, while Information Services rose 10.1% to $109 million. Additionally, Technology Solutions revenues surged 88.6% to $149 million in the reported quarter.

During the reported quarter, Nasdaq’s order intakes surged to $138 million from $98 million in the year-ago quarter. Consequently, total order value (the value of orders signed that have not been recognized as revenue) improved to $655 million from $559 million in the prior-year quarter. New listings totaled 94 against 55 in the year-ago quarter.

Meanwhile, on a non-GAAP basis, core operating expenses stood at $313 million, up 32.6% from the year-ago period. Consequently, total operating income, on a non-GAAP basis, jumped 11.3% year over year to $207 million. However, operating margin contracted 400 basis points year over year to 40%.

Highlights of Full-Year 2013

For full-year 2013, Nasdaq reported operating earnings per share of $2.60, which exceeded the Zacks Consensus Estimate of $2.57 but lagged $2.50 per share recorded in 2012. Operating net income improved 3% over 2012 to $445 million.

Including extraordinary items, GAAP net income came in at $385 million or $2.25 per share, lower than $352 million or $2.04 per share recorded in 2012.

Total net exchange operating revenues soared 13.2% year over year to $1.9 billion and were in line with the Zacks Consensus Estimate. Core operating expenses increased 20.8% year over year to $1.12 billion on a non-GAAP basis. Hence, operating margin fell to 41% from 44% in 2012.

Financial Update

As of Dec 31, 2013, Nasdaq had cash and cash equivalents of $509 million, down from $582 million at the end of 2012. Debt obligations of Nasdaq stood at $2.59 billion, up from $1.84 billion at 2012-end.

However, Nasdaq paid $98 million of debt in the reported quarter. Total assets of Nasdaq increased to $12.58 billion from $9.13 billion at 2012-end, while total equity improved to $6.18 billion from $5.21 billion at 2012-end.


Management aims to reduce debt-to-EBITDA ratio to mid-2x range by mid-2014. Core operating expense is projected to be within $1.215–1.235 billion. Additionally, the company expects approximately $35–50 million of incremental expenses from new initiative or GIFT spending in 2014.

Including these charges, total expenses are projected in the range of $1.250–1.285 billion. Tax rate is anticipated in the band of 33–35% in 2014.


Concurrently, the board of directors of Nasdaq declared a cash dividend of 13 cents per share, which is payable on Mar 28, 2014 to shareholders of record as on Mar 14.

On Dec 27, 2013, Nasdaq paid a cash dividend of 13 cents per share to shareholders of record as on Dec 13.

Other Stocks to Consider

Nasdaq presently carries a Zacks Rank #3 (Hold). Better-ranked financial stocks include CME Group Inc. (CME - Free Report) , American Express Co. (AXP - Free Report) and Moody’s Corp. (MCO - Free Report) , each carrying a Zacks Rank #2 (Buy).

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