ICE Upped to Strong Buy on Promising Organic Initiatives - Analyst Blog

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On Nov 19, Zacks Investment Research upgraded Intercontinental Exchange Inc. (ICE) by a notch to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Earnings estimates of ICE have been witnessing an upward trend since the company's third-quarter 2014 results on the back of an improved business model and successful organic growth initiatives. The sale of non-core NYSE technology businesses and successful completion of the initial public offering (IPO) of the Euronext business have supported cash flows and capital position.

Meanwhile, improving market volatility and financial leverage, along with product launches and strategic alliances are likely to boost the company's financials in the quarters ahead. Additionally, the acquisition of SuperDerivatives (in Oct 2014) and expected commencement of the new exchange and clearinghouse in Singapore in Mar 2015 augur long-term growth.  

These factors are further driving competitive leverage in the peer group. Alongside, a healthy capital deployment, amid acquisitions and restructuring, is helping to retain investors' confidence in the stock.

While weak derivative volumes, higher expenses and stringent regulations are challenges that ICE still needs to tackle prudently, we believe that its slow but steady efforts to boost operating leverage will show positive results in the future.

Additionally, this global exchange operator has delivered positive earnings surprises for four straight quarters with an average beat of 2.7%. Notably, on Nov 4, ICE reported third-quarter 2014 operating earnings per share (EPS) of $2.15, which exceeded the Zacks Consensus Estimate by 6.4% and the year-ago quarter figure by 9.1%.

Upward earnings estimate revisions raise optimism. The Zacks Consensus Estimate for both 2014 and 2015 moved north by 6.7% each to $9.41 and $11.78 a share, respectively, in the last 30 days. No downward estimate revision was witnessed for both these years.

On a year-over-year basis, earnings are expected to jump 15.2% and 25.2% in 2014 and 2015, respectively, indicating earnings beat for both the years.

Other Promising Picks

Stocks like Insperity Inc. (NSP), FTI Consulting Inc. (FCN) and HNI Corp. (HNI) are presently worth considering in the financial sector. All these sport the same Zacks Rank as ICE.


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INTERCONTNTLEXC (ICE): Free Stock Analysis Report

FTI CONSULTING (FCN): Free Stock Analysis Report

INSPERITY INC (NSP): Free Stock Analysis Report

HNI CORP (HNI): Free Stock Analysis Report

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