) second-quarter 2013 operating earnings of $2.19 per share
modestly exceeded the Zacks Consensus Estimate of $2.17 and the
year-ago quarter figure of $1.95. Accordingly, operating net
income increased 12.3% to $160.8 million.
Operating net income excluded after-tax extraordinary items of
$7.6 million in the reported quarter, related to merger costs and
duplicate rent expense. However, no such items were recorded in
the year-ago quarter. Including these items, reported net income
stood at $153.3 million or $2.09 per share in the quarter under
The quarterly results of IntercontinentalExchange reflected
higher transaction and clearing fee revenues driven by improved
performance from the financial futures market and credit default
swap (CDS) business. Alongside,
and other businesses drove the top line, while higher expenses
limited margin expansion.
Total revenue grew 5.8% year over year to $371.6 million, and
breezed past the Zacks Consensus Estimate of $370 million. The
upside was mainly attributable to a 3.9% improvement in
transaction and clearing fee
revenues to $318.9 million in the reported quarter. Furthermore,
revenues increased 7.8% year over year to $40.1 million, whereas
revenues escalated 75% to $12.6 million.
Additionally, average daily futures volume improved 4% year
over year to 3.5 million contracts. Revenue from
IntercontinentalExchange's CDS business totaled $40 million,
climbing 11% from the prior-year quarter.
On the other hand, total operating expenses climbed 8.2% year
over year to $146.9 million, primarily due to increase in
expenses related to depreciation and amortization, compensation
and benefits, rent and occupancy along with acquisition-related
transaction costs based on the recent merger deal with
NYSE Euronext Inc.
). These were partially offset by a decline in selling, general
and administrative expenses and lower professional service
Subsequently, operating income climbed 4.3% year over year to
$224.7 million. However, reported operating margin stood at
60.5%, lower than 61.3% from the year-ago period. The effective
tax rate was 30%, almost at par with the year-ago quarter.
At the end of Jun 2013, consolidated operating cash flow
increased 4% year over year to $382 million. Capital expenditure
totaled $16 million, up from $9 million in the year-ago quarter,
whereas capitalized software development costs of $9 million were
a million higher from the year-ago period.
As of Jun 30, 2013, the company recorded unrestricted cash and
investments of $1.5 billion (down from $1.61 billion as of Dec
31, 2012), while total outstanding debt improved to $803 million
from $1.13 billion at 2012-end.
Share Repurchase Update
IntercontinentalExchange had expanded its share repurchase
authorization to $500 million during the third quarter of 2012.
With no shares were bought back in the first half of 2013, the
company had shares worth $450 million available for repurchases
at the end of Jun 2013.
Guidance for 2013
IntercontinentalExchange laid out the outlook for the third
quarter of 2013, projecting acquisition-related transaction costs
of $5-7 million, capital expenditure of $38.5 million related to
purchase of office building in Atlanta. Diluted weighted average
outstanding shares are projected to be within 73-74 million for
the third quarter of 2013.
Management also revised expense guidance for 2013,
anticipating operating expense to be up by 2-3% over 2012, lower
than the prior band of 3-5%. Depreciation and amortization
expense in now estimated within $130-135 million.
Moreover, quarterly interest expense is now projected to be
higher at $10-11 million in the second half of 2013, while tax
rate is expected in the band of 27-30% in 2013.
Meanwhile, IntercontinentalExchange maintained capital
expenditures and capitalized software expenses projection within
$60-70 million, including $20-30 million related to real estate
costs in 2013. For full-year 2013, shares outstanding are
estimated in the range of 72.8-74.0 million.
Both IntercontinentalExchange and NYSE carry a Zacks Rank #3
(Hold). Other strong performers in the financial sector include
MarketAxess Holdings Inc.
HCI Group Inc.
), both of which carry a Zacks Rank #1 (Strong Buy).
HCI GROUP INC (HCI): Free Stock Analysis
INTERCONTINENTL (ICE): Free Stock Analysis
MARKETAXESS HLD (MKTX): Free Stock Analysis
NYSE EURONEXT (NYX): Free Stock Analysis
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