Intercontinental Exchange, Inc. ICE is well-poised for growth, driven by strategic acquisitions, a solid balance sheet and effective capital deployment and favorable growth estimates.
The Zacks Consensus Estimate for Intercontinental’s 2023 earnings is pegged at $5.48, indicating a 3.4% increase from the year-ago reported figure on 3.6% higher revenues of $7.56 billion.
The consensus estimate for 2024 earnings is pegged at $5.94, indicating an 8.3% increase from the year-ago reported figure on 5.1% higher revenues of $7.95 billion.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2023 and 2024 earnings has moved 1.4% and 1.5% north, respectively, in the past 60 days, reflecting analysts’ optimism.
Earnings Surprise History
Intercontinental Exchange surpassed estimates in three of the last four reported quarters and missed in one with the average beat being 1.76%.
Zacks Rank & Price Performance
ICE currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 5.4% against the industry’s decrease of 1.9%.
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Intercontinental’s top line should continue to benefit from an expansive product and service portfolio. The company remains focused on improving the mix of high-growth recurring revenues and therefore, the Black Knight buyout is in tandem with the growth strategy.
The Fixed Income and Data Services segment should gain from strength in fixed income execution and CDS clearing businesses owing to elevated volatility across global markets. In this segment, ICE expects recurring revenue growth, excluding headwinds of nearly $15 million related to FX and the Euronext data center migration, to be in the mid-single digits for 2023.
Continued strength in the pricing and analytics business owing to strong customer demand for the company’s pricing and reference data products is likely to boost its data revenues in the days ahead.
Intercontinental remains well-poised for growth, riding on accelerated digitization taking place in the U.S. residential mortgage industry to overcome several inefficiencies existing across mortgage origination workflow.
In May 2022, Intercontinental Exchange inked a deal to buy Black Knight to consolidate its presence as a provider of end-to-end electronic workflow solutions for the rapidly evolving U.S. residential mortgage industry. The deal is expected to reduce cost per mortgage origination, overlay the safety and soundness practices and create new products and services for lenders to increase homeownership.
ICE estimates mid-to-high-single-digit growth of recurring revenues in the mortgage technology segment in 2023.
The company has an impressive history of acquisitions that has not only fueled growth but also helped achieve expense synergies. The acquisition of mortgage-software firm Ellie Mae for $11 billion in a stock-cash transaction helped the acquirer to execute well in a $10 billion addressable market. The acquisition of Ellie Mae is expected to realize run-rate cost synergies of $50 million to $65 million by the end of 2023.
With more than 5,000 indices representing more than $1 trillion in benchmark assets under management, ICE is the second-largest global fixed-income provider.
Riding on operational strength, adjusted free cash flow increased 2% in the first quarter of 2023. A healthy and minimal risk-based balance sheet is likely to continue providing stability and buoyancy over the medium to long term while supporting strategic investments.
Stocks to Consider
Some better-ranked stocks from the finance sector are Reinsurance Group of America, Incorporated RGA, Kinsale Capital Group, Inc. KNSL and CME Group CME. While Reinsurance Group and Kinsale Capital sport a Zacks Rank #1 (Strong Buy), CME Group carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Reinsurance Group’s 2023 and 2024 earnings per share is pegged at $17.74 and $17.99, indicating a year-over-year increase of 22.9% and 1.4%, respectively.
Reinsurance Group has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 56.92%. In the past year, RGA has gained 15%.
Kinsale Capital has a solid track record of beating earnings estimates in each of the last trailing four quarters, the average being 14.77%. In the past year, KNSL has gained 34.7%.
The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings per share is pegged at $10.37 and $12.41, indicating a year-over-year increase of 32.9% and 19.6%, respectively.
CME Group delivered a four-quarter average earnings surprise of 2.20%. In the past year, CME has lost 10%.
The Zacks Consensus Estimate for CME’s 2023 and 2024 earnings indicates a year-over-year increase of 9.5% and 1.5%, respectively.
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