Intercontinental (ICE) Up 18.7% in a Year: More Room to Run?
Shares of Intercontinental Exchange, Inc. ICE have gained 18.7% in a year, outperforming the industry's rise of 3.9%. The Zacks S&P 500 composite increased 16.4% in the said time frame. With a market capitalization of $63.3 billion, the average volume of shares traded in the last three months was 2.2 million.
Image Source: Zacks Investment Research
The rally was largely driven by strategic acquisitions, a compelling portfolio, solid pricing and analytics business and a solid balance sheet.
This Zacks Rank #3 (Hold) company has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 1.76%.
Will the Bull Run Continue?
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.
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, ICE 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.
The company estimates mid-to-high-single-digit growth of recurring revenues in the mortgage technology segment in 2023.
Intercontinental 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.
Riding on operational strength, adjusted free cash flow should continue to increase. 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.
The Zacks Consensus Estimate for 2023 earnings has moved 0.3% north, in the past 60 days, reflecting analysts’ optimism.
Stocks to Consider
Some better-ranked stocks from the finance sector are Reinsurance Group of America, Incorporated RGA, Primerica, Inc. PRI and GoHealth, Inc. GOCO.
Reinsurance Group’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters while missing in one. RGA sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RGA’s 2023 and 2024 earnings per share indicates a year-over-year increase of 23.1% and 1.8%, respectively. In the past year, RGA’s shares have gained 16.5%.
Primerica’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters while missing in one. PRI carries a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for PRI’s 2023 and 2024 earnings per share indicates a year-over-year increase of 34% and 11.5, respectively. In the past year, PRI’s shares have surged 62.5%.
GoHealth’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters, missing the other two. Currently, GOCO carries a Zacks Rank #2.
The Zacks Consensus Estimate for GOCO’s 2023 and 2024 earnings per share indicates a year-over-year increase of 73.1% and 12.2%, respectively. In the past year, GOCO’s shares have surged 115.4%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Intercontinental Exchange Inc. (ICE) : Free Stock Analysis Report
Reinsurance Group of America, Incorporated (RGA) : Free Stock Analysis Report
Primerica, Inc. (PRI) : Free Stock Analysis Report
GoHealth, Inc. (GOCO) : Free Stock Analysis Report
