IntercontinentalExchange Group Inc.
) or ICE Group posted second-quarter 2014 operating earnings of
$2.10 per share. This outpaced the Zacks Consensus Estimate of
$2.02 but came in lower than the year-ago quarter figure of $2.19
per share, primarily on higher share count.
Intercontinentalexchange, Inc - Quarterly EPS
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However, operating net income surged 51.1% year over year to
$243 million. This excluded after-tax integration cost related to
NYSE Euronext acquisition worth $16 million in the reported
quarter, while merger costs and duplicate rent expense of $7.6
million was recorded in the year-ago quarter.
Including these items, ICE Group recorded reported net income of
$226 million or $1.95 per share versus $154 million or $2.09 per
share in the year-ago quarter.
The quarterly results of ICE Group reflected robust
year-over-year top-line growth, driven by incremental revenues from
the NYSE Euronext acquisition, which was culminated in Nov 2013.
However, equally higher expenses limited margin expansion.
Nevertheless, the sale of non-core NYSE technologies businesses and
successful completion of the initial public offering (IPO) of the
Euronext business supported cash flows and capital position.
Total net revenues escalated about 102% year over year to $750
million, but notably lagged the Zacks Consensus Estimate of $795
The year-over-year upsurge was mainly attributable to a 44.2%
spike in consolidated net
transaction and clearing fee
revenues which stood at $460 million. However, average daily
volumes fell 19% year over year in the first half of 2014,
reflecting a decline of 26% in June, 15% in May and 13% in
market data fees
revenues increased 140% to $96 million, whereas total
revenues from NYSE Euronext was at $83 million, lower than $91
million in the prior quarter. Furthermore, consolidated
revenues, which now includes NYSE Euronext-related technology
services revenues and fees from trading license, regulatory and
listed company services, escalated to $111 million from $13 million
in the year-ago quarter.
Conversely, total operating expenses rose a whopping 188% year
over year to $423 million, primarily due to increased operating
expenses as well as NYSE Euronext acquisition-related transaction
costs and compensation and benefits.
Operating income jumped 45.3% to $327 million. Reported
operating margin came in at 43.6%, plunging from 60.5% in the
year-ago period. The effective tax rate dipped to 28% from 30% in
the year-ago quarter.
At the end of Jun 2014, ICE Group's consolidated operating cash
flow surged to $836 million from $382 million in the year-ago
period. Capital expenditures totaled $47 million, up from 16
million in the year-ago period, while capitalized software
development costs grossed $40 million, up from $9 million in the
As of Jun 30, 2014, the company recorded unrestricted cash and
investments of $2.1 billion (up from $961 million at 2013-end), of
which $1.3 billion remains locked for redemption of 2015 Eurobonds.
Meanwhile, total outstanding debt stood at $3.9 billion from $5.1
billion at 2013-end.
No shares were bought back during the quarter. In Jul 2014, the
board of ICE Group expanded its share repurchase program by $600
million, of which $350 million worth of shares have been bought
back so far in third-quarter 2014. Including the prior
authorization, the company has $700 million shares available for
Cash and cash equivalents totaled $2.06 billion at the end of
Mar 2014, up from $961 million at 2013-end. Moreover, total assets
dipped to $68.5 billion, whereas total equity rose to $13.3
billion, both from 2013-end levels.
Concurrently, the board of ICE Group declared a third-quarter
2014 dividend of 65 cents, payable on Sep 30, 2014, to shareholders
of record as on Sep 16.
On Jun 30, 2014, ICE Group paid its first-quarter 2014 dividend
of 65 cents to shareholders of record as on Jun 16. The company
returned about $75 million to its shareholders through dividends in
the reported quarter.
Guidance for 2014
Management detailed its financial targets for 2014. Total
operating expense in the third quarter of 2014 is projected within
For full-year 2014, the ICE segment projects operating expenses
of about $1.55-1.56 billion, and includes acquisition-related
transaction and integration costs.
About $23-24 million of quarterly interest expense is estimated
for the second half of 2014.
Depreciation and amortization expense is expected in the band of
$80-85 million during the third-quarter and $330-335 million in
2014 (about $35 million lower than the prior estimate).
Moreover, ICE Group anticipates capital expenditures and
capitalized software expenses to be $165-175 million in 2014 (lower
from prior estimate) and $40-45 million in third-quarter 2014. The
yearly estimate includes $75-85 million related to real estate
costs in 2014, about $5 million higher than the prior
Shares outstanding are now estimated in the range of 114-116
million in the third quarter of 2014 and 114.5-115.5 million in
2014. Consolidated tax rate is expected in the band of 27-30% in
ICE Group also aims to achieve $550 million worth of run-rate
expense synergies from the NYSE acquisition, about 70% of which is
expected to be gained by 2014-end.
Stocks to Consider
ICE Group presently carries a Zacks Rank #5 (Strong Sell).
Better-ranked stocks in the financial space like Euronet Worldwide
), Moody's Corp. (
) and FleetCor Technologies, Inc. (
), all carrying a Zacks Rank #2 (Buy), are worth considering.
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INTERCONTNTLEXC (ICE): Free Stock Analysis
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EURONET WORLDWD (EEFT): Free Stock Analysis
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