) second-quarter 2012 operating earnings of $1.95 per share came a
couple of pennies ahead of the Zacks Consensus Estimate of $1.93 a
share, but it well outpaced the year-ago quarter's earnings of
$1.64 per share. Accordingly, net income attributable to
shareholders escalated 18% to $143.2 million when compared with
$121.4 in the year-ago quarter.
The quarterly results of ICE benefited from favourable futures
markets, strategic initiatives in clearing, execution and record
market data and other revenue, which in turn led to modest top-line
growth. The upside was also attributable to capital efficiency,
strict expense control lower tax rate and growth in the company's
Further, significant progress was triggered by new initiatives
that led to margin expansion. However, this was partially offset by
lower revenue from the over-the-counter (OTC) segment and credit
default swap (CDS) business.
Total revenue climbed 8% year over year to $351.2 million and
were in line with the Zacks Consensus Estimate of $351 million. The
upside was mainly attributable to a 6.3% increase in consolidated
transaction and clearing fee
revenues to $306.8 million in the reported quarter. The upside was
primarily driven by strong trading volumes in ICE's energy future
markets, new product introduction along with increased credit
default swap (CDS) clearing revenues. Additionally, consolidated
revenues accelerated 21.2% year over year to $37.2 million, while
revenues escalated 20% to $7.2 million.
Additionally, average daily futures volume increased 11% year
over year to 1.6 million contracts that led to a 14% growth in
transaction and clearing revenues in the futures segment. Even
average daily commissions in ICE's OTC energy business climbed 3%
year over year to 1.6 million in the quarter, although the
transaction and clearing revenues in the total global OTC segment
witnessed a 2% year-over-year decline. Revenue from ICE's CDS
business totaled $36 million, slipping 10% over the prior-year
Meanwhile, total operating expenses increased 6.9% year over
year to $135.8 million, primarily due to increase in compensation
and benefit expenses coupled with slightly higher rent and
occupancy costs along with selling, general and administrative and
other expenses. These were partially offset by lower depreciation
and amortization expenses along with acquisition-related
Consequently, operating income rose 12.8% year over year to
$215.4 million, while operating margin climbed to 61.3% from 58.7%
in the year-ago period. The effective tax rate was 30% against 32%
in the year-ago quarter.
At the end of the first half of 2012, consolidated operating
cash flow rose 14% year over year to $366 million. Capital
expenditures totaled $9 million during the reported quarter, while
capitalized software development costs increased to $8 million,
both at par with the year-ago period.
As of June 30, 2012, the company recorded unrestricted cash and
investments of $1.1 billion (up from $823 million as of December
31, 2011), while total outstanding debt slipped to $863 million
from $888 million at 2011-end.
Meanwhile, ICE had $331 million of share repurchase capacity
still in store at the end of June 2012. However, no shares were
repurchased during the reported quarter.
Guidance for 2012
Concurrently, management expects diluted weighted average
outstanding shares to be within 72.9-73.9 million shares for the
third quarter of 2012. Additionally, the company expects to incur
$1-2 million acquisition-related expenses per quarter.
Further, capital expenditures and capitalized software expenses
are projected to be within $35-40 million, including $7-9 million
related to real estate costs, during the second half of 2012.
In February 2012, management provided an extensive expense
outlook for 2012. While total expenses are expected to be flat with
2011 level, adjusted expenses are estimated to rise by 3-6% over
2011. Compensation expense should be up by 6-7%. Consolidated tax
rate is anticipated to be within 28-31% in 2012.
Additionally, ICE expects quarterly interest expense during 2012
to be in the range of $10-11 million, which includes interest
expenses associated with its debt facility and Russell index
Capital expenditure, including capitalized software development
costs, is projected in the band of $60-65 million. Furthermore, an
additional capital expenditure of $30-35 million is expected on the
back of real estate costs associated with consolidating multiple
locations in London and in New York. In addition, ICE's diluted
weighted average outstanding share count is expected to lie in the
range of 73.0-74.0 million shares.
CME Group Inc.
) reported second-quarter 2012 operating earnings per share of 89
cents, surpassing the Zacks Consensus Estimate of 82 cents and the
year-ago quarter's earnings of 88 cents. Results reflected strong
expense control and stable average rate per contract that were
offset by feeble volumes and reduced clearing and transaction
services during the reported quarter.
Furthermore, another prime peer,
NYSE Euronext Inc.
) is slated to release its financial results before the bell on
August 3, 2012.
Currently, ICE carries a Zacks Rank #3, implying a short-term
Hold rating and a long-term Neutral recommendation.
CME GROUP INC (CME): Free Stock Analysis Report
INTERCONTINENTL (ICE): Free Stock Analysis
NYSE EURONEXT (NYX): Free Stock Analysis Report
To read this article on Zacks.com click here.