Here's Why You Should Retain Intercontinental (ICE) Stock
Intercontinental Exchange, Inc. ICE has been in investors’ good books owing to solid segmental performance and strategic acquisitions.
Growth Projections
The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $4.93 and $5.33, indicating year-over-year increase of nearly 9.3% and 8%, respectively. The expected long-term earnings growth is pegged at 10.5%, which betters the industry average of 5.6%.
Estimate Revision
The Zacks Consensus Estimate for 2021 and 2022 moved 0.2% and 0.1% north in the past 30 days, reflecting analyst optimism.
Earnings Surprise History
Intercontinental Exchange surpassed estimates in each of the last four reported quarters, with the average beat being 3.67%.
Zacks Rank & Price Performance
Intercontinental Exchange currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 38.2%, outperforming the industry’s increase of 32.7%.
Return on Equity (ROE)
The company’s ROE for the trailing 12 months is 13.8%, better than the industry average of 11.8%, reflecting the company’s efficiency in utilizing shareholders’ fund. The company aims to generate solid mid-teens returns for its shareholders.
Business Tailwinds
The company remains well-poised for growth on the back of its three segments, Exchanges, Fixed Income and Data Services and Mortgage Technology.
Growth in energy business, cash equities and options trading, energy open interest (best indicator of long-term growth), global natural gas business as well as growth in environmental complex are likely to benefit the Exchange segment of the company. Intercontinental Exchange expects recurring revenues in the Exchange segment to be between $310 million and $315 million in the first quarter of 2021.
Continued growth in customer demand for both ICE Global Network and consolidated feeds boost the Fixed Income and Data Services segment. In 2021, recurring revenues in this segment is projected to grow 5% to 6% on a constant currency basis for the full year, including $395 million to $400 million in the first quarter. These expectations are supported by Annual Subscription Value growth of 5.7% exiting 2020.
Banking on favorable financing conditions, accelerating millennial home ownership trends as well as demand for digital workflow tools, such as network, closing solutions and analytics, the Mortgage Technology segment is likely to witness solid performance in the long term. Recurring revenues in the first quarter are projected in the range of $122 million and $127 million, representing around 30% growth versus last year on a pro-forma basis.
These three segments have been driving the company’s revenues as evident from a eight-year (2012-2020) CAGR of 25.2%. The trend is likely to continue in the days ahead. Notably, the Zacks Consensus Estimate for the company’s 2021 and 2022 revenues is pegged at $6.8 billion and $7.2 billion, respectively, indicating year-over-year increase of nearly 14% and 4.8%.
The company’s series of acquisitions contributed to its growth trajectory. It made numerous purchases that enabled it to strengthen competitive position globally, broaden product offerings and services as well as to support the growth of the company. In the first quarter of 2020, it acquired Bridge2 Solutions in a bid to launch products that further drive loyalty and empower consumers to trade, transfer and spend digital assets in entirely new ways.
Also, in September 2020, it acquired Ellie Mae to expand its ICE Mortgage Technology portfolio. Ellie Mae had also increased market share, from 38% to 44%, in a short period of time.
Stocks to Consider
Some better-ranked stocks from the finance sector are OTC Markets Group Inc. OTCM, International Money Express, Inc. IMXI and Repay Holdings Corporation RPAY, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings of OTC Markets surpassed estimates in three of the last four quarters and missed in the other one, the average earnings surprise being 11.96%.
The bottom line of International Money Express surpassed estimates in each of the last four quarters, the average being 11.92%.
Repay Holdings’ earnings surpassed estimates in each of the last four quarters, the average being 50.35%.
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