August 3, 2011 / 11:48 AM / 6 years ago

UPDATE 4-ICE profit jumps as another exchange beats Street

* Robust Brent, Gasoil trading helps 19 pct earnings rise

* Core EPS of $1.69 in Q2 vs Wall St view of $1.67

* Slightly lowers CDS-clearing revenue expectations

* ICE shares down 3.3 pct at lowest level since June (Updates share slide)

By Jonathan Spicer

NEW YORK, Aug 3 (Reuters) - IntercontinentalExchange Inc’s (ICE.N) quarterly profit jumped 19 percent on brisk energy-futures trading as yet another trans-Atlantic exchange operator beat analysts’ expectations.

Revenue from increasingly valuable areas like market data helped the company, known as ICE, keep pace with CME Group Inc (CME.O) and other rival U.S. markets.

Though ICE’s results beat average expectations, its shares dropped 3.3 percent to $115.15, their lowest level since June.

Raymond James analyst Patrick O‘Shaughnessy cited high expenses as a dark spot in the results. That coupled with the broader market fall on Wednesday may have weighed on shares.

ICE also slightly lowered its forecast for revenue from clearing credit default swaps, or CDS, a two-year-old business meant to take advantage of post-crisis financial reforms in the United States and Europe.

The company, which in the second quarter dropped an $11 billion bid for NYSE Euronext NYX.N, said it should continue to benefit as lawmakers and regulators globally push swaps through exchanges and clearinghouses such as those it runs.

“Despite delays (in U.S. reforms), we’re moving ahead on key provisions to bring needed certainty to the markets,” ICE Chief Executive Officer Jeffrey Sprecher said on a conference call with analysts and reporters.

Record trading in Brent crude and Gasoil drove ICE’s futures revenue up 15 percent to $149 million, as average daily volume rose 5 percent.

Sprecher, who built ICE largely to take on derivatives giant CME, said on the call that the rival’s WTI contract no longer reflected global oil prices. The price divergence between WTI and Brent “may continue for some time,” he added. [ID:nN1E7720G1]

SURPRISING EXCHANGES

Second-quarter earnings rose to $121.4 million from $101.7 million a year earlier, ICE said.

Excluding one-time items such as costs from the NYSE Euronext offer, the profit was $1.69 per share. Analysts on average had expected $1.67, according to Thomson Reuters I/B/E/S.

Revenue rose 10 percent to $325 million, while analysts had forecast $323 million.

Chicago-based CME beat the Street this week with an 8 percent profit rise, and it vowed to continue to trim costs. [ID:nN1E76R03N]

Nasdaq OMX Group (NDAQ.O) reported a better-than-expected 4 percent profit increase last week, while NYSE Euronext’s earnings fell 16 percent, but narrowly beat expectations. [ID:nN1E76Q03J] [ID:nL6E7J208X]

Exchanges have become “much better at managing expectations in terms of expenses, and they’ve managed to drive some growth in areas that we don’t have a lot of visibility in, like ICE’s market data,” said Evercore Partners analyst Chris Allen.

In April, ICE and Nasdaq partnered to bid $11 billion for the New York Stock Exchange parent. That plan would have killed NYSE Euronext’s planned sale to Deutsche Boerse AG (DB1Gn.DE) and given ICE the valuable Liffe derivatives operation in London.

But the pair dropped their unsolicited bid in mid-May when U.S. antitrust officials said it would not be allowed.

For 2011, ICE now expects CDS-clearing revenue of between $65 million and $67 million, down from about $70 million to $73 million that it had previously forecast. (Reporting by Jonathan Spicer, editing by Dave Zimmerman and Lisa Von Ahn)

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