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Intercontinental (ICE) Gains 7% YTD: Will the Upside Continue?

Shares of Intercontinental Exchange ICE have gained 6.8% year to date, outperforming the industry’s increase of 2.1% and the Finance sector’s rise of 4.2% in the said time frame. With a market capitalization of 78.6 billion, the average volume of shares traded in the last three months was 2.2 million.

A compelling portfolio, expansive risk-management services, strategic buyouts, solid balance sheet and effective capital deployment drive this Zacks Rank #3 (Hold) company.

The Zacks Consensus Estimate for 2024 and 2025 earnings has moved up 1 cent and 2 cents, respectively, in the past 30 days, reflecting analysts’ optimism.

Earnings of ICE grew 10% in the last five years, better than the industry average of 9.8%. Intercontinental has a solid surprise history, beating earnings estimates in three of the last four reported quarters while meeting in one, the average being 2.94%.

Its return on invested capital in the trailing 12 months was 6.1%, outperforming the industry average of 4.8%. This reflects its efficiency in utilizing funds to generate income.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Can the Stock Retain the Momentum?

Intercontinental Exchange’s top line should continue to gain from an expansive and compelling product and a broad range of risk management services. With more than 5,000 indices representing more than $1 trillion in benchmark assets under management, ICE is the second-largest global fixed-income provider.

ICE boasts the largest mortgage network across the United States and thus remains well poised to benefit from accelerated digitization in the U.S. residential mortgage industry. Intercontinental estimates Mortgage revenues to grow at an average annual rate of 8-10% over the next 10 years. The Mortgage Technology business is expected to grow in the low to mid-teens. ICE estimates total revenues from the mortgage technology business to be flat to down in the low-single-digit range in 2024.

An impressive inorganic growth track, apart from a strengthening portfolio and expanding presence, helps it achieve expense synergies. The Black Knight acquisition complements its existing revenue streams and improves the mix of high-growth recurring revenues. ICE estimates mid-single digit growth in Fixed Income and Data Services recurring revenues.

The Zacks Consensus Estimate for 2024 earnings is pegged at $5.96, indicating an increase of 6.1% year over year on 15.3% higher revenues of $9.2 billion. The consensus estimate for 2025 earnings is pegged at $6.61, implying an upside of 10.8% on 5.7% higher revenues of $9.7 billion. The long-term earnings growth rate is currently pegged at 9%, better than the industry average of 8%.

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.

A solid capital position helps distribute wealth to shareholders through share buybacks and dividends. While ICE has more than doubled its dividends in the last six years, it has $2.5 billion remaining under its authorization kitty.

Stocks to Consider

Some better-ranked stocks from the finance sector are Coinbase Global COIN, First BanCorp FBP and Morgan Stanley MS.

Coinbase delivered a trailing four-quarter average earnings surprise of 364.63%. COIN stock has gained 17.5% year to date. The Zacks Consensus Estimate for COIN’s 2024 EPS indicates a year-over-year increase of 1,804.5%. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for First BanCorp’s 2024 and 2025 EPS indicates a year-over-year increase of 3.5% and 6.2%, respectively. Year to date, FBP has gained 10.4%. First BanCorp delivered a trailing four-quarter average earnings surprise of 17.05%. It has a Zacks Rank #2 (Buy)

Morgan Stanley delivered a trailing four-quarter average earnings surprise of 11.15%. Year to date, the stock has risen 6.6%. The Zacks Consensus Estimate for MS’s 2024 and 2025 earnings suggests a year-over-year rise of 25.1% and 13%, respectively. It has a Zacks Rank #2.


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Morgan Stanley (MS) : Free Stock Analysis Report

Intercontinental Exchange Inc. (ICE) : Free Stock Analysis Report

First BanCorp. (FBP) : Free Stock Analysis Report

Coinbase Global, Inc. (COIN) : Free Stock Analysis Report

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