By Pritam Biswas and Laura Matthews
(Reuters) -Intercontinental Exchange reported higher than expected fourth-quarter profit on Thursday, as the New York Stock Exchange parent benefited from strong trading volumes in the energy and options segments.
Shares of the company, which also raised its quarterly dividend by 7%, were up 4.5% at $167.77 in early trading.
Global commodity and energy markets saw significant volatility due to the conflict in the Middle East. Market turmoil tends to boost overall trading volumes for exchanges.
The markets also saw strong trading activity in the reported quarter as the U.S. Federal Reserve continued its monetary easing policy after keeping interest rates high for over a year to tackle inflation.
The exchange operator said revenue from trading in energy-related products surged 16% in the fourth quarter to $477 million.
ICE’s energy trading volumes rose 15%, with gains across segments including oil and gasoil as well as other crude and refined products. Natural gas average daily volumes increased 17%.
“As trade dynamics evolve and become increasingly complex, customers not only are seeking liquidity in the major global benchmarks, but also in products that provide greater hedging precision,” Ben Jackson, president of ICE, said on an analysts’ call.
FUTURES AND OPTIONS BOOST
ICE saw record trading volumes in futures and options where average daily volumes in the fourth quarter rose 22% when compared to the previous year.
Total revenue from the company’s exchange business, the biggest component of its revenue base, was $1.24 billion compared with $1.14 billion in the year-earlier period.
Financials revenue, which is housed within the company’s exchanges segment and includes interest rates and other financial futures and options, jumped 30%.
The rate cuts and hopes of a soft landing for the economy coupled with expectations of a potential new pro-business U.S. administration motivated many startups to go for initial public offerings, even though post-IPO performances remained sub-par.
An increase in the number of IPOs helps exchanges, which charge fees for stock listings.
ICE’s listings business posted a 1% rise in quarterly revenue.
The company reported adjusted earnings of $875 million, or $1.52 per share, for the three months ended Dec. 31, compared with $760 million, or $1.33 per share, a year earlier. An IBES estimate had put the adjusted EPS at $1.49.
ICE CEO Jeff Sprecher said novel policy decisions from the European Commission and new governments in the United States and Britain could impact inflation and employment and in turn drive demand for interest-rate risk management this year.
He said robust AI investment coupled with uncertain rate policies and the potential demands for energy by the sector could boost the need for commodity risk management while continuing to stimulate trading in equity markets.
“We believe that we’re better positioned than ever to capitalize on the secular and cyclical trends across asset classes,” Sprecher said. “We remain focused on investing and executing on the many growth opportunities that are in front of us.”
(Reporting by Pritam Biswas in Bengaluru and Laura Matthews in New York; Editing by Devika Syamnath, Shailesh Kuber, Mark Porter and Emelia Sithole-Matarise)
