Jefferies Trims PT on Nasdaq OMX (NDAQ) to $27 Following Mgmt. Meeting; Maintains 'Hold' Rating
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Price: $98.22 +0.69%
Rating Summary:
23 Buy, 10 Hold, 1 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
23 Buy, 10 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Jefferies reduced its price target on Nasdaq OMX Group (Nasdaq: NDAQ) slightly, from $29 to $27, while keeping at Hold rating on the shares.
The move came following a meeting with CEO Bob Greifeld and CFO Lee Shavel. Jefferies notes the meeting was more centered around "accretive capital deployment and cash flow generation as opposed to near-term M&A opportunities. While M&A remains a longer-term priority, near-term deal activity appears to be unlikely in our view."
Jefferies comments: "Management was more focused on potential share repurchases than any large-scale M&A transactions. While we discussed LSE, TMX, and CBOE, management highlighted LCH.Clearnet as the only near-term M&A opportunity it was focused on. This predominantly reflects the company's limited options given the current valuation." Jefferies views a potential LCH deal as a long-term strategic positive.
Further: "Currently Nasdaq's Debt/EBITDA ratio of approximately 2.8x (as of 1Q) is slightly above the company's targeted 2.5x level, the level at which management is comfortable beginning to buy back stock. However, $200M in debt must first be paid to bring the ratio down to 2.5x. Based on current projections, we believe Nasdaq has the capacity to repurchase approximately $100 million per quarter beginning in mid-3Q11 or early 4Q11."
The firm modestly reduces its second-quarter earnings outlook by one cent to 60 cents per share, due mainly in part to lighter-than-expected trading volumes. Jefferies sees net revs down in the quarter, though operating income and operating margins will still show sequential growth.
For more analyst coverage on Nasdaq OMX, click here. For a ratings history of Nasdaq OMX, click here.
Nasdaq OMX shares are flat early Wednesday.
The move came following a meeting with CEO Bob Greifeld and CFO Lee Shavel. Jefferies notes the meeting was more centered around "accretive capital deployment and cash flow generation as opposed to near-term M&A opportunities. While M&A remains a longer-term priority, near-term deal activity appears to be unlikely in our view."
Jefferies comments: "Management was more focused on potential share repurchases than any large-scale M&A transactions. While we discussed LSE, TMX, and CBOE, management highlighted LCH.Clearnet as the only near-term M&A opportunity it was focused on. This predominantly reflects the company's limited options given the current valuation." Jefferies views a potential LCH deal as a long-term strategic positive.
Further: "Currently Nasdaq's Debt/EBITDA ratio of approximately 2.8x (as of 1Q) is slightly above the company's targeted 2.5x level, the level at which management is comfortable beginning to buy back stock. However, $200M in debt must first be paid to bring the ratio down to 2.5x. Based on current projections, we believe Nasdaq has the capacity to repurchase approximately $100 million per quarter beginning in mid-3Q11 or early 4Q11."
The firm modestly reduces its second-quarter earnings outlook by one cent to 60 cents per share, due mainly in part to lighter-than-expected trading volumes. Jefferies sees net revs down in the quarter, though operating income and operating margins will still show sequential growth.
For more analyst coverage on Nasdaq OMX, click here. For a ratings history of Nasdaq OMX, click here.
Nasdaq OMX shares are flat early Wednesday.
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