Intercontinental Exchange (ICE) Beats On Earnings In Q2

Intercontinental Exchange, Inc. (NYSE:ICE) posted second-quarter 2016 operating earnings per share of a record $3.43, which beat the Zacks Consensus Estimate of $3.38. Also, earnings improved about 18.3% year over year.

The quarter marks the seventh straight quarter of double-digit earnings growth. The bottom-line improvement was backed by growth across the company’s trading and clearing, and data and listings business segments.

Total net revenue of $1.13 billion soared 42% year over year. This growth reflects a massive increase of 142% in data services revenues to a record $497 million and a 15% increase in transaction and clearing revenues, net, to $860 million. Also, listings revenues increased nearly 4% to a record $103 million, thereby adding to overall growth. However, total net revenue surpassed the Zacks Consensus Estimate of $1.12.

Furthermore, consolidated other revenues, which now include revenues from NYSE Euronext-related technology services and fees from trading license along with regulatory and listed company services, decreased 2.3% year over year to $42 million.

Total reported operating expenses increased 57.5% year over year to $578 million, primarily owing to higher compensation and benefits, depreciation and amortization, acquisition-related transaction and integration costs, and technology and communication costs.

Operating income increased 28% to $551 million. Operating margin was 49% in the reported quarter, down 500 basis points year over year.

Financial Update

Cash flows from operations were $1.1 billion for the first six months of 2016, up 43% year over year. Capital expenditure totaled $38 million for the same period.

Intercontinental Exchange exited the quarter with cash and cash equivalents of $390 million, down 38% from the 2015-end level. Long-term debt of $4.7 billion inched up 0.02% from the 2015-end level.

As of Jun 30, 2016 total assets decreased 3.6% to $75.2 billion from $77.9 billion as of Dec 31, 2015. As of Jun 30, 2016 total equity was $15.3 billion, up 3.4% from $14.8 billion as of Dec 31, 2015.

Capital Deployment

The company returned over $200 million via dividends in the first half of 2016.

The board of directors approved a 5-for-1 stock split to enhance trading efficiency and accessibility and a new $1 billion share buyback program.

Guidance for 2016

The company expects adjusted operating expenses in the range of $485–$495 million for the third quarter of 2016 and $1.94–$1.97 billion for the full year.

Moreover, the company expects data services revenues to increase in the range of 6–7% in 2016 from the 2015 level.

The company anticipates realizing expense synergies of about $100 million in 2016.

Intercontinental Exchange's diluted share count for the third quarter and full year is expected to be in the range of 119–121 million.

Zacks Rank

Intercontinental Exchange presently carries a Zacks Rank #3 (Hold).

Performance of Other Securities Exchanges

Among the other players from the securities exchange space that have reported second-quarter earnings so far, the bottom line at CME Group Inc. (NASDAQ:CME) , Nasdaq, Inc. (NASDAQ:NDAQ) and MarketAxess Holdings Inc.'s (NASDAQ:MKTX) beat the Zacks Consensus Estimate.

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