Shares of Intercontinental Exchange, Inc. ICE hit a new 52-week high of $81.29 on Nov 16, gaining traction from strong third-quarter 2018 earnings. With about 4.5 million shares exchanging hands in the last trading session, the stock finally closed at $81.22, rising 1.3%. The company’s return on equity rose 11.7%, comparing favorably with the industry’s average of 10.8%.
Robust Q3 Results
Intercontinental Exchange’s bottom line of 85 cents outpaced the Zacks Consensus Estimate by 6.3% and also improved 16.4% year over year on strong performance across futures, cash equities, listings and data services business lines.
Revenues of $1.2 billion grew nearly 5% and marked the 22nd consecutive quarter of revenue growth on a year-over-year basis. Revenues across all its segments reported growth.
Free cash flow of $1.7 billion in the first nine months of 2018 increased 33.3% year over year and returned $1.5 billion in capital to its shareholders.
Shares of the company have gained 11.1% since it posted solid third-quarter results, outperforming the industry’s increase of 7.5%. This Zacks Rank #2 (Buy) securities exchange flaunts a solid surprise history, surpassing estimates for five straight quarters with average of 2.49%.
Why Should the Stock Continue the Bull Run?
Intercontinental Exchange enjoys a competitive advantage, given its multi-asset portfolio, allowing global diversification while tapping new opportunities in the emerging economies.
Its acquisition of MERS in October, should be the foundation of ICE Mortgage Services. The company estimates incremental fourth-quarter revenues related to ICE Mortgage Services to be between $17 million and $19 million.
The company intends capital deployment of about $1.7 billion in 2018. In October, the company’s board of directors approved a new $2-billion buyback authorization.
The company’s 20% dividend hike in first-quarter 2018 marked its fourth consecutive double-digit hike. Management is optimistic about another raise in 2019.
Given the strength in global data services as well as diverse liquid, global derivatives and equities markets, the company is well poised to deliver revenue growth. Intercontinental Exchange projects revenue growth between 6% and 7% for 2018 and has a long-term target of mid-to-high single digits.
The Zacks Consensus Estimate for 2018 reflects 19.3% increase on 6.3% higher revenues. The consensus mark for top and bottom lines in 2019 translates into a year-over-year increase of 9.9% and 6.5%, respectively. Over the past 30 days, the consensus mark has been moved 2% north for 2018 and 1% for 2019.
Long-term earnings growth is currently pegged at 9.9%, better than the industry’s average of 9.8%.
Other Stocks to Consider
Investors interested in finance sector can also check out a few other top-ranked stocks like Arbor Realty Trust. ABR, Athene Holding Ltd. ATH and Banner Corporation. BANR, each sporting Zacks Rank # 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Arbor Realty Trust invests in a diversified portfolio of structured finance assets in the multifamily and commercial real estate markets. It delivered a 2.78% positive surprise in the earlier reported quarter.
Athene Holding issues, reinsures, and acquires retirement savings products in the United States, the District of Columbia and Germany. Last reported quarter, it pulled off an 14.71% earnings surprise.
Banner Corporation as the bank holding company for Banner Bank and Islanders Bank provides commercial banking, and financial products and services to individuals, businesses, and public sector entities, primarily in the United States. It came up with a 25.26% beat in the previously reported quarter.
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