ICE's Volume, Profit on Fire

InterContinental posted another strong quarter among the exchange operators.
By Debra Borchardt ,

Futures exchange operator

InterContinental Exchange

(ICE) - Get Report

on Friday reported first-quarter profits jumped 66% on record trading volume.

The exchange operator posted net income of $92.3 million, or $1.29 a diluted share, vs. $55.6 million, or 80 cents a diluted share in the year ago period. The results, which exclude a 2-cents-a-share charge from closing the futures pits at ICE Futures U.S., beat the $1.27-a-share consensus figure reported by Thomson Financial.

The total average daily volume for futures contracts was 863,325 in April, vs. 755,474 in April 2007. The commissions for InterContinental's global over-the-counter business skyrocketed 96% over last April.

Consolidated transaction revenues increased 62% to $177.4 million in the first quarter, from $109.3 million in the first quarter last year. The increase in transaction revenue was driven primarily by new products, strong trading volume in its futures and global OTC segments, and the entry of new participants in InterContinental's markets.

"We have numerous initiatives underway to support growth across new and existing asset classes," Chairman and CEO Jeffrey Sprecher said in a company statement. "Our organic growth remains strong despite the broader credit market issues over the past three quarters, and we have experienced record transaction volume in our markets this year."

Operating expenses did increase 34% as a result of closing the futures pits and costs associated with the establishment of ICE Clear Europe, which is expected to go live in July 2008. The $7 million facility will be the first new major London derivatives clearing house in over a hundred years.

"We continue to evaluate a range of M&A opportunities to expand our position as one of the most diversified and global derivatives markets in the world," Sprecher said in the statement. It looks as if Asia is the next ground to conquer.

Goldman Sachs analyst Daniel Harris has a buy rating on the stock, as the firm's estimates and price target are under review as a result of the strong results. On Friday, he wrote higher-than-expected data services and other revenues, partially offset by a modestly higher tax rate, drive the upside to the firm's estimate.

"Volume trends remain healthy, with

over-the-counter volumes nearly doubling the year ago level," Harris wrote.

Recently, rival

CME Group

(CME) - Get Report

reported similar strong volumes, along with its soon-to-be partner

Nymex

(NMX)

.

NYSE Euronext

(NYX)

is set to report earnings next week on May 6.

Futures trading has proliferated as evidence of the huge volume increases that InterContinental has experienced. Many companies like

E*Trade

(ETFC) - Get Report

and

optionsXpress

(OXPS)

have jumped in to capitalize on the trend.

Shares of InterContinental were up fractionally in recent trading, but the stock is up 18% for the year.

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