Intercontinental Exchange (ICE) Q1 Earnings Beat, Up Y/Y

Intercontinental Exchange, Inc. (NYSE:ICE) posted first-quarter 2016 operating earnings per share of a record $3.68, which beat the Zacks Consensus Estimate of $3.67 by 0.3%. Also, earnings improved about 20.3% year over year.

Notably, the reported quarter is the best one in the company’s history. The bottom-line improvement was backed by growth across the company’s global markets and data services business.

Total net revenue of $1.15 billion soared 35.8% year over year. The growth reflects a massive 138.5% increase in data services revenues to a record $477 million as well as an increase of 11.1% in transaction and clearing revenues, net, to $929 million. Also, listings revenues increased nearly 2% to a record $103 million, thereby adding to overall growth. However, the total net revenue missed the Zacks Consensus Estimate by 0.2%.

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, rose 4.7% year over year to $45 million.

Total reported operating expenses increased 46.9% year over year to $570 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 26.4% year over year to $584 million. Operating margin was 51% in the reported quarter, contracting 300 basis points year over year.

Financial Update

In the first quarter, Intercontinental Exchange’s consolidated operating cash flow came in at $597 million, up 28% from the year-ago quarter. Capital expenditure totaled $25 million.

Intercontinental Exchange exited the quarter with cash and cash equivalents of $468 million, down 25.4% from the 2015-end level. Long-term debt of $4.7 billion inched up 0.02% from the 2015-end level.

As of Mar 31 2016 total assets increased 1.5% to $79.1 billion from $77.9 billion as of Dec 31, 2015. As of Mar 31 2016 total equity was $15.1 billion, up 1.6% from $14.8 billion as of Dec 31, 2015.

Capital Deployment

The company returned over $100 million via dividends in the reported quarter.

Guidance for 2016

The company expects adjusted operating expenses in the range of $495 million to $505 million for second quarter of 2016 and $1.97 billion to $2.0 billion for 2016.

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 between $85 million and $90 million in 2016.

Intercontinental Exchange's diluted share count for the second quarter and full-year 2016 is expected to be in the range of 118–121 million.

Zacks Rank and Performance of OtherSecurities Exchanges

ICE presently carries a Zacks Rank #3 (Hold). Among the other players from the securities exchange space that have reported their first-quarter earnings so far, the bottom line at MarketAxess Holdings Inc. (NASDAQ:MKTX) and CBOE Holdings, Inc. (NASDAQ:CBOE) missed their respective Zacks Consensus Estimate, while Nasdaq, Inc.’s (NASDAQ:NDAQ) earnings came in ahead of the consensus.