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ICE Quarterly Earnings

Anjelica Tan/MEDILL

IntercontinentalExchange Inc. announced record quarter earnings of $128.9 million, up 27 percent from last year.


Amid merger buzz, IntercontinentalExchange posts record earnings

by Anjelica Tan
May 04, 2011


In the midst of the battle to buy NYSE Euronext, IntercontinentalExchange Inc. reported record profits, up 27 percent, surpassing Wall Street's expectations. 

The Atlanta-based electronic market operator earned $128.9 million, or $1.74 per diluted share, in the first quarter ended March 31, compared with $101.2 million, or $1.36 per diluted share, in the same period last year. Analysts surveyed by Thomson Reuters were expecting earnings of $1.69 per share.

Record revenue of $334.3 million, up 19 percent from the first quarter last year when revenue was $281.6 million, contributed to the stronger-than-expected earnings. Average daily commissions for the company’s OTC energy business hit a record $1.6 million in the first quarter, up 18 percent. 

High-volume trading drove growth in transaction and clearing fees for ICE’s futures and global over-the-counter segments. The company’s Brent crude contract, its benchmark product, hit a monthly volume record of 11.1 million in March. 

ICE, a direct competitor of Chicago’s CME Group Inc., released its earnings two days after the company and Nasdaq OMX Group Inc. announced their intent to go hostile with their $11 billion takeover bid for NYSE Euronext by taking the offer directly to investors.

The partners have been fighting Deutsche Börse AG for the buyout of the Big Board since launching their bid early last month. ICE’s stock hit a 52-week high in March but has been on a downward trend since news of the merger competition began that month. 

The stock closed Wednesday at $114.85, down $1.60. 

Nevertheless, ICE Chairman and CEO Jeffrey Sprecher said in Wednesday's earnings release that the company’s long history of successful acquisitions has provided opportunities for future growth. ICE most recently acquired electronic options broker Ballista Securities LLC in February. 

Chief Financial Officer Scott Hill, commenting on ICE’s strategic expansion initiatives, said in the release, "From the launch of our BRIX partnership in Brazil to growing our global clearing services, ICE continued to pursue attractive opportunities in the first quarter of 2011.” 

Analyst Patrick O’Shaughnessy of Raymond James Financial Inc. agreed that ICE had a solid quarter. 

“The firm capitalized on an improving operating environment during the quarter to post healthy revenue growth on a sequential and year-over-year basis,” O’Shaughnessy said in a research note. 

One area of concern O’Shaughnessy pointed out is the 13 percent drop in revenue in ICE’s credit default swap clearing business from the fourth quarter of 2010. Perhaps with this in mind, the company announced Tuesday its ICE Link platform will offer connectivity to CME Clearing for credit default swaps starting this summer. 

According to company guidance, ICE’s weighted average diluted share count for the quarter ending June 30 is expected to be between 74.2 million and 75.2 million shares outstanding. The diluted share count for 2011 is expected to be in the range of 74.1 million to 75.1 shares outstanding. The weighted average number of shares outstanding during the first quarter was 74.2 million. The company's remaining capacity in its share repurchase program is $210 million. 

Analysts forecast ICE to earn $1.64 per share in the second quarter, compared with actual diluted earnings per share of $1.36 in the same quarter last year.