) fourth-quarter 2012 operating earnings of $1.84 per share
comfortably surpassed both the Zacks Consensus Estimate and the
year-ago quarter's earnings of $1.75 a share. Accordingly,
operating net income climbed 5.1% to $135.1 million.
Operating net income excluded after-tax extraordinary items of
$5.7 million in the reported quarter and $1.7 million in the
year-ago quarter. Including these items, reported net income
stood at $129.5 million or $1.76 per share compared with $126.8
million or $1.73 per share in the year-ago quarter.
The quarterly results of IntercontinentalExchange reflected a
decline in transaction and clearing fee revenues driven by weak
performance from the financial futures market and credit default
swap (CDS) business. This not only marred the top line but also
limited margin expansion. However, some cushion was provided by
capital efficiency, strict expense control, lower tax rate and
growth in the company's market data and other businesses.
Total revenue dipped 1.2% year over year to $323.4 million,
although it slivered past the Zacks Consensus Estimate of $322
million. The downside was mainly attributable to a 3.6% decrease
transaction and clearing fee
revenues to $277.1 million in the reported quarter. However,
revenues improved 14.4% year over year to $37.3 million, while
revenues escalated 22.9% to $8.9 million.
Additionally, average daily futures volume slid 1% year over
year to 3.1 million contracts and led to a decline of 2% in
transaction and clearing revenues in the futures segment. Revenue
from IntercontinentalExchange's CDS business totaled $36 million,
plunging 16% from the prior-year quarter.
On the other hand, total operating expenses slipped 1.1% year
over year to $131.0 million, primarily due to decrease in
compensation and benefit expenses coupled with lower selling,
general and administrative expenses and professional service
costs. These were partially offset by slightly higher
depreciation and amortization expenses along with
acquisition-related transaction costs based on the recent merger
NYSE Euronext Inc.
Consequently, operating income edged down 1.2% year over year
to $192.4 million. Meanwhile, reported operating margin stood
flat at 59.5% from the year-ago period.
Highlights of Full-Year 2012
For full-year 2012, IntercontinentalExchange reported
operating earnings per share of $7.60, beating the Zacks
Consensus Estimate of $7.51 and $6.98 recorded in 2011. Operating
net income grew 8.1% year over year to $557.3 million. Including
extraordinary items, reported net income was $551.6 million or
$7.52 per share in 2012 against $509.7 million or $6.90 per share
Total revenue edged up 2.7% year over year to $1.36 billion
and was in line with the Zacks Consensus Estimate of $1.36
billion. Total operating expenses rose marginally by 0.3% year
over year to $536.0 million.
Operating income increased 4.3% year over year to $827.0
million, while operating margin stood at 60.7% in 2012 versus
59.7 in 2011. The effective tax rate was 29% against 31% in
At the end of 2012, consolidated operating cash flow grew 3%
year over year to $733 million. Capital expenditures totaled $32
million, down from $57 million in 2011, while capitalized
software development costs increased to $35 million from $30
million in 2011.
As of December 31, 2012, the company recorded unrestricted
cash and investments of $1.61 billion (up from $823 million as of
December 31, 2011), while total outstanding debt swelled to $1.13
billion from $888 million at 2011-end.
IntercontinentalExchange expanded its share repurchase
authorization to $500 million during the third quarter of 2012.
While $50 million worth of stock was bought back in reported
quarter, $450 million remained available for repurchases at the
end of 2012.
Guidance for 2013
For 2013, management anticipates its operating expense to be
up by 3-5% over 2012. Depreciation and amortization expense in
estimated within $135-140 million. Moreover, quarterly interest
expense is projected to be $9-10 million, while tax rate is
expected in the band of 27-30% in 2013.
IntercontinentalExchange expects capital expenditures and
capitalized software expenses within $60-70 million, including
$20-30 million related to real estate costs in 2013.
The company is also expected to incur acquisition-related
transaction costs worth about $10-12 million in the first quarter
of 2013. Additionally, $4-5 million of duplicate rent expenses
and lease termination costs are anticipated in the first half of
Diluted weighted average outstanding shares are projected to
be within 72.6-73.8 million shares for the first quarter of 2013.
For full-year 2013, shares outstanding are anticipated in the
range of 72.8-74.0 million shares.
Both IntercontinentalExchange and NYSE carry a Zacks Rank #3
(Hold). Other strong performers in the financial sector include
HCC Insurance Holdings Inc.
), both of which carry a Zacks Rank #1 (Strong Buy).
HCC INS HLDGS (HCC): Free Stock Analysis
INTERCONTINENTL (ICE): Free Stock Analysis
MOODYS CORP (MCO): Free Stock Analysis Report
NYSE EURONEXT (NYX): Free Stock Analysis
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