The shares were recently trading down $3.91, or 3.5%, to $106.48, falling for a second straight session after the Atlanta-based futures exchange operator gave an update on its trading volumes for the first quarter on Monday. Although ICE, which also has over-the-counter markets and clearinghouse businesses, reported a 26% year-over-year jump in futures volume for the three-month period and said its over-the-counter energy business posted record average daily commissions of $1.37 million, the stock has sold off in the wake of the news.
William Blair & Co. lowered its earnings estimate for the company's first quarter early Tuesday, citing a shortfall in over-the-counter credit revenue, which came in at $41.4 million vs. the firm's expectation of $51 million, as well as slight concerns about ICE's clearing business for credit default swaps in 2010.
"There is enormous operating leverage in the clearing business and management has a history of providing conservative guidance," William Blair said in its research note. "That said, the year seems to have gotten off to a slow start with only about $10 million of CDS clearing revenue compared to about $10 million last quarter -- we expected $15 million given higher underlying activity levels and the expansion of the addressable cleared CDS market over the past few quarters."
The firm now sees earnings of $1.28 per share for the first quarter, down from its prior view of $1.30 per share, and below the current average analysts' view of $1.31 per share compiled by
. William Blair's long-term view of the company remains bullish though as the firm kept its rating on ICE shares at outperform and actually lifted its full-year profit estimate by a dime to $5.20 per share to reflect "very strong futures volume and OTC commissions so far in 2010."
Jefferies had a bit more bullish take on the first-quarter update, but it was also more tempered in its view of the company ahead of the news and said it views the stock as "fairly valued" at current levels. The firm kept its hold rating on the shares intact and boosted its 12-month price to $115 from $100. It also lifted its first-quarter earnings estimate to $1.28 a share from $1.21 a share.
Heading into this week, IntercontinentalExchange's stock was up incrementally in 2010 but factoring in Tuesday's decline, it's now down about 5% for the year, and more than 12% since hitting a 52-week high of $121.93 on June 5. Still, the stock did post an overall gain of 27% in 2009, and it's appreciated more than 400% since the company went public in November 2005 at $26 per share.
The performance of ICE's peer publicly-traded U.S. exchanges has been mixed.
was down 5.6% year-to-date through Monday's close, while shares of
Nasdaq OMX Group
, were up 9% and 21%, respectively.
IntercontinentalExchange is slated to post its first-quarter results on May 5 and to hold its annual shareholders meeting on May 21. Of the 21 analysts covering the company, the majority (13) are at buy or strong buy with the remainder breaking down to seven analysts rating the stock at hold and one at underperform.
Written by Michael Baron in New York