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Robust Portfolio Aids Intercontinental Despite Rising Costs

Zacks Equity Research
Higher shipments and pricing, as well as cost management help Martin Marietta Materials (MLM) to post solid first-quarter 2019 results.

Intercontinental Exchange Inc. ICE is poised for long-term growth on the back of compelling product portfolio, acquisitions and effective capital deployment. It surpassed estimates in the last six straight quarters. In 2018, the top line improved 7%, adjusted operating income increased 8%, adjusted earnings per share grew 21% and free cash flow improved 32%, reflecting operational performance.

Intercontinental enjoys a competitive advantage, given its multi-asset portfolio, allowing global diversification while tapping new opportunities in emerging economies.

The company boasts an impressive inorganic growth story. Buyouts not only expanded Intercontinental’s growth but also led to achieving expense synergies. Management is on track with the targeted 2019 synergies of at least $30 million that are likely to enable the company to attain the initial commitment of $180 million.

A well-defined product portfolio along with a broad range of risk-management services helps the company retain revenue growth momentum. As it witnessed record revenues in 2018, it anticipates revenue growth in 2019 as well.

Intercontinental has a strong capital management policy in place. The recent increase of 15% in quarterly dividend rate marks the fifth consecutive double-digit hike since its initiation in December 2013. Its dividend currently yields 1.5%. This apart, the company regularly engages in share buybacks.

However, Intercontinental has been witnessing escalating expenses of late, rising 24.3% in the last five years. For 2019, adjusted operating expenses are projected to be $2.15-$2.20 billion, with operating expenses for the first quarter anticipated between $535 million and $545 million. Interest expenses are estimated at $71 million for the same quarter. With respect to capital expenditure, the company expects the metric between $290 million and $320 million for operational and non-operational capex, and capitalized development. Further, the company’s investment in Bakkt will likely generate $20-$25 million of expenses based on the run rate in first-quarter 2019.

Stocks Worth Considering

Stocks from the finance sector worth taking a look at are MarketAxess Holdings Inc. MKTX, Health Insurance Innovations Inc. HIIQ and Voya Financial Inc. VOYA.

MarketAxess operates an electronic trading platform that enables fixed-income market participants to trade corporate bonds and other types of fixed-income instruments worldwide. The company pulled off positive earnings surprises of 5.22% in the last reported quarter.

Health Insurance Innovations operates as a cloud-based technology platform, and distributor of individual and family health insurance plans as well as supplemental products in the United States. The company delivered a 27.27% positive surprise in the last reported quarter.

Voya Financial operates as a retirement, investment and insurance company in the United States. It came up with 8.20% positive surprise in the last reported quarter.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?

From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.

This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.

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