Will Intercontinental Exchange's (ICE) Q4 Earnings Beat?
Intercontinental Exchange, Inc. ICE is scheduled to report fourth-quarter and full-year 2016 results on Feb 7.
The company’s third-quarter 2016 earnings improved year over year. Results were driven by growth across the company’s data and listings business segments. However, it experienced reduced revenues from trading & clearing segment. Effective Nov 4, 2016, the company went for a five-for-one stock split of common stock.
Notably, Intercontinental Exchange has reported a positive earnings surprise with an average beat of 2.8% in the trailing four quarters.
Intercontinental Exchange Inc. Price and EPS Surprise
Intercontinental Exchange Inc. Price and EPS Surprise | Intercontinental Exchange Inc. Quote
However, our quantitative model doesn’t call for an earnings beat this time around. Here is why:
A stock needs to have the right combination of the two key criteria – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or 2 (Buy) or at least 3 (Hold) – for increasing chances of an earnings beat. Unfortunately, this is not the case here, as elaborated below.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for Intercontinental Exchange is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 69 cents.
Zacks Rank: Intercontinental Exchange’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of a positive earnings surprise.
Factors to Influence Q4 Results
Quarterly results of Intercontinental Exchange should benefit from improved average daily volume. Amid increased volatility driven by the U.S. presidential election and the December Fed rate hike, the company’s total futures and options volume for fourth-quarter 2016 climbed 10% on a year-over-year basis to $16.3 million contracts. The rise reflected increase in commodities as well as financials volumes.
However, on the downside, the company witnessed 7% year-over-year decline in U.S. equity options; while the U.S. cash products volume dipped 4%. Rate per contract (RPC) trends remain weak, while credit default swap revenues remained largely flat with the prior-year quarter.
Results should also benefit from the company’s strength in recurring market data revenues. Notably, management has guided data services revenues growth in the range of 6–7% in 2016 from the 2015-end level. Recent acquisitions should further support top-line growth.
For the fourth quarter, adjusted operating expenses are projected in the range of $500–$505 million. Management had estimated cost savings to expand margins to about 60% by 2016 end, and tightened operating and capital expense guidance in the third-quarter earnings conference call. The company guided adjusted operating expenses in the range of $1.94–$1.97 billion for the year 2016. This is 3% lower than the 2015 level and a $75-million improvement from the initial guidance. Also, it anticipated $115 million in synergies from Interactive Data for 2016.
Stocks that Warrant a Look
Here are some stocks worth considering, as they have the right combination of elements to post an earnings beat this quarter.
CBOE Holdings, Inc. CBOE has an Earnings ESP of +3.45% and sports a Zacks Rank #1. The company is scheduled to release results on Feb 6. You can see the complete list of today’s Zacks #1 Rank stocks here.
LPL Financial Holdings Inc. LPLA has an Earnings ESP of +2.78% and carries a Zacks Rank #2. It is slated to release results on Feb 9.
Moody's Corporation MCO will release results on Feb 17. It has an Earnings ESP of +0.89% and carries a Zacks Rank #3.
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