The Zacks Analyst Blog Highlights: NYSE Euronext, Citigroup, JPMorgan Chase, CME Group and Adobe Systems
For Immediate Release
Chicago, IL – June 19, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include NYSE Euronext (NYX), Citigroup, Inc. (C), JPMorgan Chase & Co. (JPM), CME Group Inc. (CME) and Adobe Systems Inc. (ADBE).
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Here are highlights from Monday’s Analyst Blog:
NYSE Restructures Debt
In an effort to restructure its debt, NYSE Euronext (NYX) recently declared that it has arranged a new senior unsecured credit facility worth $1 billion with a maturity period of three years. The current credit facility will allow the company’s fund its general corporate activities till June 15, 2015.
This new credit facility comes as a replacement of its existing $1.2 billion credit facility that is scheduled to mature on July 31, 2012. The new credit facility ensures uninterrupted and sufficient funding for the company.
Some of the top banks have joined hands to arrange this credit facility for NYSE. Citigroup Global Markets Inc. , a division of Citigroup, Inc. (C), J.P. Morgan Securities LLC, a division of JPMorgan Chase & Co. (JPM), Merrill Lynch, Pierce, Fenner & Smith Incorporated and Bank of China have agreed to be the joint lead arrangers and book runners for the financing.
NYSE Euronext has been making constant efforts to reduce its debt obligation since the last year and we expect its debt management strategy to empower it with fair liquidity for long-term growth opportunities.
Presently, NYSE maintains a financial leverage of 26.06%, which is almost three times more than that of its closest competitor CME Group Inc. (CME). The company’s long-term debt stands at $2.07 billion as on March 31, 2012, reducing by almost 4% from the year-ago quarter.
Being more prone to debt financing, the company’s net margin stands at 14.88% compared with 57.65% for CME Group. This is not a favorable situation as higher net margin indicates a better profitability scenario that helps in boosting investors’ confidence.
NYSE currently retains a Zacks #3 Rank, which translate into a short-term Hold rating.
Earnings Preview: Adobe Systems
With fiscal second quarter earnings to be reported on June 19, 2012, we see no change in analyst estimates for Adobe Systems Inc. (ADBE) to date.
Prior-Quarter Synopsis
Adobe’s first quarter earnings of 42 cents missed the Zacks Consensus Estimate of 46 cents due to lower revenue and its significant exposure to the European region.
Adobe’s total revenue was $1.045 billion, down 9.3% sequentially, due to weakness across all segments, and particularly in the CS product line. Products generated 77.4% of revenue that was down 13.7% sequentially, while Subscription revenue comprised 14% of revenue and was up 18.5% sequentially. Services & Support, which was down sequentially, brought in the balance.
Gross margin was 89.6%, up 10 bps from 89.5% in the comparable year-ago quarter. The increase was on account of cost savings and a favorable mix.
Agreement of Analysts
None of the 11 estimates for the second quarter were revised in the last 30 days. Even for fiscal 2012, there was no revision in the last 30 days.
Most of the analysts believe that with the release of CS6 and the Efficient Frontier acquisition, revenue and earnings per share will likely come in at the high end of the management guidance range ($1.09–$1.14 billion/$0.57–0.61). However, they believe that negative foreign currency movement will act as a headwind.
The release of CS6 on May 7 is expected to have long-term beneficial effects in terms of growth, cash flow and profitability. The analysts believe that CS6 is off to a strong start, driven by an enhanced feature set, pent-up demand, newer cloud features and subscription pricing. The CS6 release includes the introduction of Creative Cloud (:CC), which is available to customers purchasing CS6 via Subscription. Additionally, Adobe’s plans to introduce a set of tablet-based apps should serve as an incremental revenue stream according to analysts.
However, the analysts believe that the key to CS6 success will be the ability of Subscription pricing to attract brand new customers. They also do not expect strong operating margin expansion due to the company’s huge growth investments and continued hiring.
Recommendation
We believe Adobe will come out with decent second quarter results owing to increasing revenue visibility, the CS6 release, cost cutting efforts, improved execution and an expanding customer base. We believe the company’s dominance in the Creative category and the integration of Creative products with digital marketing apps will provide a competitive edge.
Additionally, Adobe’s recent acquisition of Efficient Frontier will enhance its Digital Marketing suite by adding optimization capabilities for search and display advertising while accelerating its entry into social advertising.
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