Expect Solid 2Q Results From Market Structure Firms, But Summer Slowdown Pressures Near Term Upside: Goldman Sachs

"We adjust estimates for the market structure firms under coverage to reflect 2Q2010 announcements and volume trends through mid-July, which have fallen from June in all classes....We continue to favor NDAQ, which should post a robust 2Q and offers a compelling valuation at 9X our 2010 estimate. We expect 12-14% EPS growth from 2010-2012 driven by changes in strategy (IRS clearing, UK energy trading, EU equities) and capital structure ($300 mn share buyback and $250 debt retirement)," Goldman Sachs mentions. The analysts say, "Major European currencies depreciated in 2Q10 at a similar rate observed in 1Q2010, with the euro down 8% and sterling down 4% QoQ. We believe the FX headwind is likely to be most pronounced for NYX (we estimate about 5%) given more than 35% of its net revenues are derived from euros and sterling. We expect a more muted impact on NDAQ (about 3%) as it derives a lower percentage of its revenues from overseas (31% in 1Q10) and has a more favorable currency exposure mix (more Swedish krona than euros). Limited impact on other exchanges and market structure firms." "We expect robust sequential volume growth (most notably in equity-related products in the wake of the "Flash Crash" on May 6) to fuel pre-tax margin expansion across our coverage, with the notable exception of Sell-rated TMX due to lower pricing and market share erosion. We also expect weaker revenue capture at Neutral-rated NYX and ITG in particular, although we expect revenues to be cushioned at NDAQ due to recent pricing changes," Goldman adds. More Analyst Ratings here.