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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