By Manya Saini and Laura Matthews
(Reuters) -Intercontinental Exchange reported first-quarter revenue slightly below estimates on Thursday as an uneven recovery in U.S. initial public offerings cut into the upswing from record trading activity. Revenue from IPOs fell 4% to $122 million in the first quarter. Analysts on average had expected a smaller decline of about 2.33% according to LSEG data. Overall revenue of $2.29 billion came in a touch below Wall Street expectations of $2.31 billion, while adjusted earnings per share of $1.48 were in-line with estimates.
ICE's share were down 2% to $126.07 in morning trading, driven by concern about the outlook for its mortgage technology business.
The segment brought in $499 million in the first quarter, but a dramatic change in interest rate expectations has led ICE to believe revenue growth is unlikely to improve and should be flat or down until later this year.
"Their mortgage tech business will likely face more headwinds in the second half of this year," Owen Lau, senior analyst at Oppenheimer & Co., said.
Despite the gloomy outlook for the mortgage business, trading volumes hit a record on surge in energy markets trading. Conflict in the Middle East has been reshaping the global commodities and energy markets, significantly raising volatility as investors assess the impact of shifting supply chains.
Energy trading volumes surged a record 27% with gains across segments, including oil, gasoil as well as other crude and refined products. Natural gas average daily volumes jumped 34%, including record options.
Trading across other markets was also robust with agriculture and metals climbing 11%, helped by a record 47% surge in cocoa trading volume.
Prices of the commodity behind chocolate have soared to all-time highs as supply tightened after years of poor harvests.
Total average daily volumes at ICE jumped 16% to hit a record in the first quarter. Consolidated net revenue rose 21% to $2.3 billion.
While U.S. initial public offerings are expected to rebound this year as capital market volatility settles, the post-debut performance of newly listed companies has been uneven, prompting some caution from investors.
Warren Gardiner, ICE's chief financial officer, told analysts on a call the company's flagship New York Stock Exchange captured nearly 70% of total proceeds raised as the IPO market has improved.
"[We welcomed] six of the top seven IPOs year-to-date, despite more than 50% of new listings not meeting our gold standard of qualification criteria," said Gardiner.
The NYSE hosted the IPOs of several high-profile companies in the first quarter, including social media firm Reddit and Wilson tennis racket maker Amer Sports.
ICE's adjusted first-quarter net income rose to $852 million, or $1.48 per share compared with $791 million, or $1.41 per share, a year earlier.