How Will NYSE Euronext Weather This Storm?

NYSE Euronext (NYSE:NYX) is focusing on a standalone savings strategy after an unsuccessful attempt at a merger with Deutsche Boerse earlier this year resulted in the U.S. exchange operator reporting a 44 percent fall in first-quarter profit. Slowed stock trading has hurt profits, and the merger had been planned to increase earnings and sales through cooperation with the Germany-based operator on derivatives.

NYSE Euronext is operates the New York Stock Exchange, the London-based Liffe, and bourses in Paris, Lisbon, Brussels, and Amsterdam.

“Our first-quarter results reflect the challenging operating environment which carried over into 2012 and will continue to result in near-term headwinds,” chief executive Duncan Niederauer said in a statement. “Looking ahead into 2013 and 2014, we are focused on creating value by enhancing the underlying earnings power of the company and solidly executing on the three core pillars of our earnings growth strategy outlined at our investor day.”

In a meeting with shareholders earlier this month, NYSE Euronext had said it would try to accumulate $250 million in annual savings by the end of 2014. A program aimed at bringing about organizational efficiency, called “Project 14,” targets saving about $90 million. The operator will also complete a stock buyback program this year that will purchase $550 million worth of shares.

The operator is moving some clearing for derivatives trades at Liffe to its own clearinghouse. NYSE Liffe Clearing will start operating by the middle of the next year and will cost the exchange about $85 million. It also wants to build a second clearinghouse in Paris eventually.

In the last quarter, net income fell from $155 million a year earlier to $87 million. Earnings of 47 cents a share fell short of the average estimate of 48 cents per share.

Cash trading in the U.S. fell 23 percent from the year-ago period, to 1.8 billion shares a day. Cash trading transactions in Europe also fell, to 1.6 million a day from 1.8 million a year ago. Revenue from derivatives was $176 million, down 25 percent from a year ago.

In February, NYSE’s plans to merge with Deutsche Boerse were rejected by European regulators. Deutsche Boerse also reported a drop in first-quarter net income — of 31 percent to 146.2 million euros ($194 million).