) first-quarter 2013 operating earnings of $2.03 per share
comfortably surpassed the Zacks Consensus Estimate of $1.98 but
were only a penny higher the year-ago quarter's earnings.
Accordingly, operating net income inched up 0.6% to $148.8
Operating net income excluded after-tax extraordinary items of
$13.3 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 $135.4 million or $1.85 per share in the quarter
The quarterly results of IntercontinentalExchange reflected a
decline in transaction and clearing fee revenues driven by weak
performance from the financial futures market and credit default
swap (CDS) business. This marred the top line, while higher
expenses limited margin expansion and reduced operating cash
flow. However, some cushion was provided by lower tax rate and
growth in the company's market data and other businesses.
Total revenue dipped 3.6% year over year to $351.9 million,
although it slivered past the Zacks Consensus Estimate of $350
million. The downside was mainly attributable to a 7% decrease in
transaction and clearing fee
revenues to $299.7 million in the reported quarter. However,
revenues improved 12.4% year over year to $40.9 million, whereas
revenues escalated 68.7% to $11.3 million.
Additionally, average daily futures volume slid 4% year over
year to 3.6 million contracts. Revenue from
IntercontinentalExchange's CDS business totaled $33 million,
plunging 16% from the prior-year quarter.
On the other hand, total operating expenses climbed 8.4% year
over year to $151.8 million, primarily due to increase in
depreciation and amortization expenses along with
acquisition-related transaction costs based on the recent merger
NYSE Euronext Inc.
). These were partially offset by a decline in compensation and
benefit expenses coupled with lower selling, general and
administrative expenses and professional service costs.
Consequently, operating income declined 11.1% year over year
to $200.1 million. Meanwhile, reported operating margin stood at
56.9%, lower than 61.7% from the year-ago period. The effective
tax rate was 28% against 30% in the year-ago quarter.
At the end of Mar 2013, consolidated operating cash flow
decreased 19% year over year to $150 million. Capital
expenditures totaled $16 million, up from $7 million in the
year-ago quarter, while capitalized software development costs
were flat at $9 million from the year-ago period.
As of Mar 31, 2013, the company recorded unrestricted cash and
investments of $1.4 billion (down from $1.61 billion as of Dec
31, 2012), while total outstanding debt improved marginally to
$911 million from $1.13 billion at 2012-end.
No shares were bought back during the reported quarter.
Guidance for 2013
Management projects to incur acquisition-related transaction
costs worth about $10-12 million in the second quarter of 2013.
Diluted weighted average outstanding shares are projected to be
within 73.1-74.1 million shares for the second quarter of
In Feb 2013, IntercontinentalExchange laid out the outlook for
2013. Operating expense is anticipated to be up by 3-5% over
2012. Depreciation and amortization expense in estimated within
$135-140 million. Moreover, quarterly interest expense is
projected to be $9-10 million, while tax rate is expected in the
band of 27-30% in 2013.
Additionally, $4-5 million of duplicate rent expenses and
lease termination costs are anticipated in the first half of
2013. IntercontinentalExchange expects capital expenditures and
capitalized software expenses within $60-70 million, including
$20-30 million related to real estate costs in 2013.
For full-year 2013, shares outstanding are anticipated in the
range of 72.8-74.0 million shares.
Both IntercontinentalExchange and NYSE carry a Zacks Rank #3
(Hold). Other strong performers in the financial sector include
Stancorp Financial Group Inc.
Protective Life Corp.
), both of which carry a Zacks Rank #1 (Strong Buy).
INTERCONTINENTL (ICE): Free Stock Analysis
NYSE EURONEXT (NYX): Free Stock Analysis
PROTECTIVE LIFE (PL): Free Stock Analysis
STANCORP FNL CP (SFG): Free Stock Analysis
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