A month has gone by since the last earnings report for IntercontinentalExchange (ICE). Shares have added about 4.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is ICE due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Intercontinental Exchange Q2 Earnings & Revenues Top
Intercontinental Exchange reported second-quarter 2019 adjusted earnings per share of 94 cents, beating the Zacks Consensus Estimate by 2.2%. Also, the bottom line improved 4.4% on a year-over-year basis.
The company witnessed strength in global energy business and compounding growth in subscription-based Data & Listings business.
Performance in Detail
Intercontinental Exchange’s revenues of $1.3 billion increased 4.2% year over year on higher transaction and clearing (5%), data services (5.1%) and other revenues (14.5%). Moreover, the top line outpaced the Zacks Consensus Estimate by 0.4%.
Net revenues of Trading and Clearing segment were $634 million, up 4% year over year, while Data and Listings revenues were $664 million, up 4.2% year over year
Total operating expenses rose 4.6% year over year to $618 million, primarily due to higher compensation and professional services, rent and occupancy, selling, general and administrative and depreciation and amortization. Adjusted operating expenses were $540 million in the second quarter, up 7.4% from the year-ago quarter’s figure.
Adjusted operating income improved 2% year over year to $758 million. Adjusted operating margin contracted 200 basis points (bps) from the year-ago quarter to 58%.
Trading and Clearing's adjusted operating income of $408 million was down 1.5% year over year. Adjusted operating margin contracted 400 bps. Data and Listings' adjusted operating income rose 6.4% year over year to $350 million and adjusted operating margin of 53% expanded 100 bps.
Total Futures & Options totaled 5.6 million contracts, down 9% year over year. Revenue per contract of $1.15 increased 9% year over year.
As of Jun 30, 2019, Intercontinental Exchange had cash and cash equivalents of $1.7 billion, up 11.3% from the level as of Dec 31, 2018. Long-term debt of $6.5 billion was up 0.1% from 2018-end level.
Total equity was $17.1 billion as of Jun 30, 2019, up 0.5% from $16.9 billion as of Dec 31, 2018.
Operating cash flow was $1.4 billion in the first half of 2019, up 12% year over year. Free cash flow was $1.2 billion, up 13% year over year.
Share Repurchase and Dividend Update
In the first half of 2019, the company bought back shares worth $780 million and paid dividends amounting to $312 million.
Third-Quarter 2019 Guidance
Data revenues are estimated between $550 million and $555 million.
Operating expenses are projected in the range of $632-$642 million. Adjusted operating expenses are expected to be in the range of $552 million to $562 million.
The company expects interest expense of $73 million in the period.
Weighted average shares outstanding are anticipated between 560 million and 566 million shares.
Data revenues are estimated between $2.19 billion and $2.24 billion.
Operating expenses are predicted in the band of $2.50-$2.52 billion. Adjusted operating expenses are expected to be in the range of $2.19 million to $2.21 million.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months.
Currently, ICE has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
ICE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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