* First-quarter net EPS C$0.58/shr vs C$0.49
* Adjusted EPS down, misses estimates
* Revenue up 21 percent at C$135.8 million
* Shares close down 10.2 percent at C$34.09 (Adds details from conference call, quotes)
By Jennifer Kwan
TORONTO, April 29 (Reuters) - Toronto Stock Exchange operator TMX Group Inc (X.TO) said on Wednesday its quarterly profit rose by almost a third, but its shares fell as the results missed analysts' forecasts as some stock trading revenue dropped and expenses rose.
TMX, which also runs the small-cap TSX Venture Exchange and the Montreal Exchange derivatives market, said net income rose 31 percent to C$42.9 million ($35.8 million), or 58 Canadian cents a share, in the first quarter, ended March 31.
That compares with a profit of C$32.7 million, or 49 Canadian cents a share, in the year-earlier period.
However, on an adjusted basis, TMX said its earnings of 58 Canadian cents a share were down from 72 Canadian cents a share a year earlier after excluding a C$15.2 million charge for a terminated joint venture with ISE Ventures LLC.
Analysts, on average, had expected earnings per share of 67 Canadian cents, before items, on revenue of C$141.3 million, according to Reuters Estimates.
Thomas Caldwell, chairman of Caldwell Financial Ltd, said TMX has performed well considering the economic downturn.
"The fundamentals of this report are same old, same old," he said. "What is not same old is the behavior of the stock. What I am interested in is it's got a good franchise, it's got good management and the stock price is behaving very positively," he added.
TMX stock is up nearly 65 percent from its November low of C$20.73. On Wednesday it closed C$3.86, or 10.2 percent, lower at C$34.09 on the Toronto Stock Exchange.
Lower cash equity trading and listing revenues, as well as higher expenses and lower investment income were the main drag on profits, the company said.
"People will probably lower their expectations for cash equities revenue for the rest of the year," said Jeff Fenwick, an analyst at Cormark Securities, but stressed the fundamentals of the company are strong.
"The first quarter of this year was a challenging one for TMX group and, certainly, for capital markets in Canada and across the world," TMX Chief Executive Tom Kloet told analysts on a conference call. "It is clear that some areas of our business were negatively impacted."
The company said cash markets trading revenue fell 19 percent, due primarily to changes in equity trading fees announced late last year. The changes, which came into effect in January, increased volume but the trading mix and patterns ate into equity trading revenues more than the company had expected.
TMX has aggressively cut fees, improved technology and diversified its business to fight off competition, and bolstered its derivatives business with last year's takeover of the Montreal Exchange.
For the quarter, total revenue rose 21 percent to C$135.8 million from C$112.4 million, helped by strength in its derivatives, energy trading and market data units.
Operating expenses rose 55 percent to C$69.8 million, due mainly to costs related to the acquisition of the Montreal Exchange derivatives business.
TMX said the Toronto Stock Exchange had an 18 percent rise in volumes to 30.0 billion securities in the quarter, from 25.5 billion in the year-earlier quarter. Volume on the TSX Venture Exchange sank 30 percent to 8.1 billion from 11.5 billion.
$1=$1.20 Canadian Reporting by Jennifer Kwan; editing by Peter Galloway