) third-quarter 2012 operating earnings of $1.79 per share
modestly exceeded the Zacks Consensus Estimate of $1.72 a share.
However, the results lagged the year-ago quarter's earnings of
$1.85 per share.
Accordingly, net income attributable to shareholders dipped
4.2% to $131.1 million compared with $136.9 in the year-ago
quarter. Including extraordinary items, reported net income in
the year-ago quarter was $132.6 million or $1.80 per share, while
no such items were recorded in the reported quarter.
The quarterly results of IntercontinentalExchange reflected
strong decline in transaction and clearing fee revenues driven by
weak performance from the over-the-counter (OTC) segment and
credit default swap (CDS) business. This not only marred the top
line but also limited margin expansion. However, some cushion was
provided by capital efficiency, strict expense control, lower tax
rate and growth in the company's market data and other
Total revenue fell 5.2% year over year to $323.3 million and
also lagged the Zacks Consensus Estimate of $325 million. The
downside was mainly attributable to a 7.4% increase in
transaction and clearing fee
revenues to $279.2 million in the reported quarter, primarily
driven by significant declines in trading volumes in
IntercontinentalExchange's power and energy future markets along
with decreased credit default swap (CDS) clearing revenues.
revenues improved 11.5% year over year to $35.9 million, while
revenues escalated 14.2% to $8.1 million.
Additionally, average daily futures volume slid 4% year over
year to 1.5 million contracts and led to a meagre 1% growth in
transaction and clearing revenues in the futures segment. Also,
average daily commissions in IntercontinentalExchange's OTC
energy business reduced 9% year over year to 1.4 million in the
quarter, due to which the transaction and clearing revenues in
the total global OTC segment witnessed a 16% year-over-year
decline. Revenue from IntercontinentalExchange's CDS business
totaled $33 million, plunging 28.3% from $46 million in the
However, total operating expenses slipped 5.6% year over year
to $129.1 million, primarily due to decrease in compensation and
benefit expenses coupled with lower depreciation and amortization
expenses, acquisition-related transaction costs and professional
service costs. These were partially offset by higher selling,
general and administrative expenses
Consequently, operating income fell 4.9% year over year to
$194.1 million, while operating margin stood flat at 60% from the
year-ago period. The effective tax rate was 27% against 30% in
the year-ago quarter.
At the end of the first nine months of 2012, consolidated
operating cash flow grew 6% year over year to $573 million.
Capital expenditures totaled $24 million, while capitalized
software development costs increased to $26 million, both at
higher than the first nine months of 2011.
As of September 30, 2012, the company recorded unrestricted
cash and investments of $1.2 billion (up from $823 million as of
December 31, 2011), while total outstanding debt slipped to $850
million from $888 million at 2011-end.
Meanwhile, IntercontinentalExchange expanded its share
repurchase authorization to $500 million during the reported
quarter. While $13 million worth of stock was bought back in
October 2012, $487 million remained available for repurchases at
the end of last month.
Guidance for 2012
Concurrently, management anticipates its expense for 2012 to
be up by 0-2% over 2011. Diluted weighted average outstanding
shares are projected to be within 73.0-74.0 million shares for
the fourth quarter of 2012. For full-year 2012, shares
outstanding are anticipated in the range of 72.9-73.9 million
Previously, IntercontinentalExchange anticipated 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.
On October 25,
CME Group Inc.
) reported third-quarter 2012 operating earnings per share of 70
cents, breezing past the Zacks Consensus Estimate by a penny but
significantly lagging behind the year-ago quarter's earnings of
95 cents. Results reflected strong expense control and stable
average rate per contract that were more than offset by very
feeble volumes and reduced clearing and transaction services
along with market data revenue during the reported quarter. This
also led to the top-line plunge.
Furthermore, another prime peer,
NYSE Euronext Inc.
) is slated to release its financial results before the bell on
November 6, 2012.
Currently, IntercontinentalExchange carries a Zacks Rank #4,
implying a short-term Sell rating and a long-term Neutral
CME GROUP INC (CME): Free Stock Analysis
INTERCONTINENTL (ICE): Free Stock Analysis
NYSE EURONEXT (NYX): Free Stock Analysis
To read this article on Zacks.com click here.