) unveiled two new foreign exchange (FX) futures contracts in
Indian Rupee (INR) and Brazilian Real, in an attempt to take an
extra step of developing business into emerging nations. These
new futures will begin trading from January 28, 2013 onwards.
These non-deliverable forward currencies will be settled in
cash and will be hedged against the US dollar.
IntercontinentalExchange is the first US stock exchange to offer
futures contract in Indian Rupee. Thus far, the company offers
more than 60 FX futures contracts. During the second quarter of
2012, the company also included non-deliverable forward FX
over-the-counter (OTC) contracts to its clearing services
The company is strategizing to attain a strong foothold in the
emerging markets and has achieved a competitive leverage on
demonstrating immense growth potential in its futures and OTC
market. The company is well positioned to drive its operating
leveragethrough these organic efforts and maintain its
competitive edge against arch-rivals such as
CME Group Inc.
NYSE Euronext Inc.
). Its volumes and margin are also expected for grow once the
global markets stabilize, as more futures and OTC contracts are
now exchange-traded and cleared.
Moreover, introduction of new products is crucial for the core
growth of the company, which has been following the ongoing weak
industry trends. This was even reflected in its third quarter
results, wherein both top- and bottom-line lagged the year-ago
comparisons due to severe decline in transaction and clearing fee
revenues driven by weak performances from the OTC segment and
credit default swap (CDS) business. However, some cushion was
provided by capital efficiency, strict expense control, lower tax
rate and growth in the company's market data and other
Currently, the Zacks Consensus Estimate for the fourth quarter
operating earnings is pegged at $1.83 per share, which would
climb about 3.7% from the year-ago quarter. Over the last 30
days, 12 out of 16 analysts covering the stock have reduced their
estimates for the fourth quarter of 2012, while 3 upward
revisions were witnessed. However, earnings estimate of $7.60 per
share for 2012 exhibit stability with an expected year-over-year
growth of 7.4%.
We retain our long term Neutral recommendation on
IntercontinentalExchange. It also has a quantitative Zacks #3
Rank that translates into a short-term Hold rating.
CME GROUP INC (CME): Free Stock Analysis
INTERCONTINENTL (ICE): Free Stock Analysis
NYSE EURONEXT (NYX): Free Stock Analysis
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