ICE Group Inc
) posted first-quarter 2014 operating earnings of $2.60 per share.
This was at par with the Zacks Consensus Estimate of $2.60 and
higher than the year-ago quarter figure of $2.03 per share,
primarily due to lower share count in the year-ago quarter.
Accordingly, operating net income surged 102.3% year over year to
$301 million. This excluded after-tax cost related to NYSE Euronext
acquisition worth $39 million in the reported quarter, while
another $13.3 million was recorded in the year-ago quarter, related
to merger costs and duplicate rent expense.
Including these items, ICE Group recorded reported net income of
$262 million or $2.27 per share versus $135 million or $1.85 per
share in the year-ago quarter.
The quarterly results of ICE Group reflected robust growth in the
top line, driven by incremental revenues from the NYSE Euronext
acquisition, which was culminated in Nov 2013. However, equally
higher expenses deterred margin and cash flow growth.
Total net revenues escalated about 165% year over year to $932
million, and swiftly exceeded the Zacks Consensus Estimate of $907
The year-over-year upsurge was mainly attributable to a 91.3% spike
in consolidated net transaction and clearing fee revenues which
stood at $574 million. Consolidated market data fees revenues
increased 124.4% to $133 million, whereas total listing fee
revenues from NYSE Euronext was at $91 million, higher than $35
million in the prior quarter.
Furthermore, consolidated other revenues, which now includes
NYSE Euronext-related technology services revenues and fees from
trading license, regulatory and listed company services, escalated
to $134 million from $11 million in the year-ago quarter.
Conversely, total operating expenses surged a whopping 244% year
over year to $523 million, primarily due to increased operating
expenses as well as NYSE Euronext acquisition-related transaction
costs and compensation and benefits.
Subsequently, operating income jumped 104.5% to $409 million.
Reported operating margin came in at 43.9%, plunging from 56.8% in
the year-ago period. The effective tax rate stood at par at 28%.
At the end of Mar 2014, consolidated operating cash flow surged to
$519 million from $150 million in the year-ago quarter. Capital
expenditures totaled $31 million, up from 16 million in the
year-ago period, while capitalized software development costs
grossed $20 million, up from $9 million in the year-ago quarter.
As of Mar 31, 2014, the company recorded unrestricted cash and
investments of $1.0 billion (up from $961 million at 2013-end),
while total outstanding debt stood at $4.9 billion from $5.1
billion at 2013-end. No shares were bought back during the quarter.
Cash and cash equivalents totaled $964 million at the end of Mar
2014, up from $961 million at 2013-end. Moreover, total assets
appreciated to $65.9 billion, whereas total equity rose to $12.95
billion, from 2013-end levels.
Concurrently, the board of ICE Group declared a second-quarter 2014
dividend of 65 cents, payable on Jun 30, 2014, to shareholders of
record as on Jun 16.
On Mar 31, 2014, ICE Group paid its first-quarter 2014 dividend of
65 cents to shareholders of record as on Mar 17.
Guidance for 2014
Management detailed its financial targets for 2014, reflecting
higher expenses and capital expenditure. Total expense in the
second quarter of 2014 is projected within $485-495 million, of
which the ICE segment is likely to incur about $390-400 million.
For full-year 2014, the ICE segment projects operating expenses of
about $1.56-1.58 billion, and includes acquisition-related
transaction and integration costs.
Other revenues are expected to be approximately of $120-130 million
in second-quarter 2014. About $26-27 million of quarterly interest
expense is estimated for the rest of 2014.
Depreciation and amortization expense is expected in the band of
$85-90 million during the second-quarter and $360-370 million in
Moreover, ICE Group anticipates capital expenditures and
capitalized software expenses to be $200-210 million in 2014 and
$60-65 million in second-quarter 2014. The yearly estimate includes
$70-80 million related to real estate costs in 2014, higher than
the prior projection.
Shares outstanding are now estimated in the range of 115-116
million in the second quarter of 2014 and 114-117 million in 2014.
Consolidated tax rate is expected in the band of 27-30% in 2014.
Furthermore, the guidance excludes certain non-strategic NYSE
Technologies businesses, which are expected to be divested from
mid-2014 onwards but are already part of discontinued operations.
ICE Group also aims to achieve 70% of the $500 million worth of
run-rate expense synergies by 2014-end.
ICE Group presently carries a Zacks Rank #3 (Hold). Some
better-ranked stocks in the financial space include
Euronet Worldwide Inc
General Finance Corp
State Auto Financial Corp.
), all of which sport a Zacks Rank #1 (Strong Buy).
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