IntercontinentalExchange Inc.’s (ICE)
fourth-quarter 2011 operating earnings of $1.76 per share were
significantly ahead of the Zacks Consensus Estimate of $1.68 per
share and $1.35 per share reported in the year-ago period.
Excluding certain net acquisition-related costs, net operating
income of $129.3 million surged 29.4% year over year in the
reported quarter. Net income attributable to shareholders was
$126.8 million or $1.73 per share, compared with $99.1 million or
$1.34 per share in the year-ago quarter.
The quarterly results of ICE benefited from favourable
over-the-counter (OTC) execution and record futures trading that in
turn led to strong top-line growth. The upside was also
attributable to a lower tax rate, growth in the company’s core
businesses, significant progress triggered on new initiatives and
an increasing demand for commodities. However, this was partially
offset by higher-than-expected operating expenses.
ICE’s total revenue escalated 14.8% year over year to $327.2
million and came in about in line with the Zacks Consensus Estimate
of $327 million. The upside was mainly attributable to a 14.3%
increase in consolidated transaction and clearing
fee revenues to $287.3 million in the reported
quarter, primarily driven by strong trading volumes in ICE's energy
futures and OTC markets, new product introduction along with
increase in credit default swap (CDS) clearing revenues.
Additionally, consolidated market data
revenues grew 18.1% year over year to $32.6 million, while
consolidated other revenues surged 21.7%
to $7.3 million.
Average daily futures volume increased 12% year over year to 1.4
million contracts, while average daily commissions in ICE's OTC
energy business grew 21% year over year to 1.6 million for the
quarter, resulting to a 16% year-over-year ascent for the total
global OTC segment and a 13% growth in futures segment. Besides,
revenue from ICE’s credit default swap (CDS) business totaled $41
million, climbing 10% over the prior-year quarter.
Meanwhile, total operating expenses climbed 4.7% year over year
to $132.4 million, primarily due to increase in compensation and
benefit expenses coupled with higher professional service costs.
These were partially offset by lower selling, general and
administrative and flattish depreciation and amortization
expenses.
Consequently, operating margin climbed to 59.5% from 55.6% in
the year-ago period. The effective tax rate was 29% against 32% in
the year-ago quarter.
Full-Year 2011 Highlights
For full-year 2011, ICE recorded net operating income of $523.4
million or $7.08 per share, which breezed past the Zacks Consensus
Estimate of $7.01 per share and net operating income of $420.9
million or $5.65 per share recorded in 2010. Including certain net
acquisition-related costs, net income attributable to shareholders
surged to $509.7 million or $6.90 per share from $398.3 million or
$5.35 per share in 2010.
Total revenue increased 15.4% year over year to $1.33 billion,
which came in line with the Zacks Consensus Estimate. Total
operating expenses ascended 7.3% year over year to $534.2 million.
As a result, operating margin rose to 59.8% from 56.7% in 2010. The
effective tax rate was 31% compared with 33% in 2010.
Financial Update
At the end of 2011, consolidated cash flow from operations, grew
to $713 million, soaring 34% over 2010. Capital expenditures
totaled $57 million in 2011, up from 422 million in 2010, while
capitalized software development costs increased to $30 million
from $26 million.
As of December 31, 2011, the company recorded unrestricted cash
and investments of $823 million (up from $622 million as of
December 31, 2010), although total outstanding debt increased to
$888 million from $579 million at 2010-end.
Share Repurchase Update
In September 2011, the board of ICE had sanctioned a new stock
repurchase program worth $300 million, to be carried on over a
period of time depending on the market conditions, while it also
had $85 million of share repurchasing capacity available from the
prior authorization.
Meanwhile, during the reported quarter, ICE bought back shares
worth $47 million, while a total of $175 million worth of shares
were repurchased in 2011. Consequently, the company had $334
million of share repurchase capacity still in store at the end of
2011.
Guidance for 2012
Concurrently, management provided an extensive expense outlook
for 2012. While total expenses are expected to be flat over 2011,
adjusted expenses are estimated to rise by 3–6%. 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
in the range of $10–11 million, which includes interest expenses
associated with its debt facility and Russell index license.
Capital expenditures, including capitalized software development
costs, are projected in the range 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.
Concurrently, ICE's diluted weighted average outstanding share
count for the first quarter of 2012 is expected to be in the range
of 72.9–73.9 million shares outstanding and for 2012 is expected to
lie in the range of 73.0–74.2 million shares.
Peer Take
On February 2, 2012, CME Group Inc. (CME)
reported its fourth-quarter 2011 operating earnings per share of
$3.55, below both the Zacks Consensus Estimate of $3.67 and $3.77
reported in the year-ago quarter. Operating net income also slipped
6.8% to $235.6 million. The decline was primarily attributable to
reduced volume growth coupled with higher-than-expected
expense.
Meanwhile, another prime peer, NYSE Euronext
Inc. (NYX), is scheduled to release its earnings results
before the market opens on February 10, 2012.
CME GROUP INC (CME): Free Stock Analysis Report
INTERCONTINENTL (ICE): Free Stock Analysis Report
NYSE EURONEXT (NYX): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
CME (NASDAQ:CME)
Historical Stock Chart
From Aug 2024 to Sep 2024
CME (NASDAQ:CME)
Historical Stock Chart
From Sep 2023 to Sep 2024