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ICE (ICE) Up 11.9% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for IntercontinentalExchange (ICE - Free Report) . Shares have added about 11.9% 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 $1.07, which beat the Zacks Consensus Estimate by 2.9%. Also, the bottom line improved 13.8% on a year-over-year basis.

The company witnessed continued revenue growth driven by strong Trading and Clearing as well as Data and Listings.

Performance in Detail  

Intercontinental Exchange’s revenues of $1.4 billion increased 7.5% year over year on higher revenues from transaction and clearing, data services, listings and other revenues. Moreover, the top line outpaced the Zacks Consensus Estimate by 0.5%.

Net revenues of Trading and Clearing segment were $710 million, up 12% year over year, while Data and Listings revenues were $685 million, up 3% year over year

Total operating expenses rose 5.3% year over year to $651 million, primarily due to higher compensation and professional services, technology and communication expenses, rent and occupancy and acquisition-related transaction and integration costs. Adjusted operating expenses were $575 million in the second quarter, up 6.5% from the year-ago quarter’s figure.

Adjusted operating income improved 8.2% year over year to $820 million. Adjusted operating margin expanded 100 basis points (bps) from the year-ago quarter to 59%.

Trading and Clearing's adjusted operating income of $545 million was up 11.3% year over year. Adjusted operating margin contracted 100 bps. Data and Listings' adjusted operating income rose 4.6% year over year to $366 million and adjusted operating margin of 53% was flat year over year.

Total Futures & Options totaled 5.6 million contracts, flat year over year. Revenue per contract of $1.17 increased 2% year over year.

Financial Update

As of Jun 30, 2020, Intercontinental Exchange had cash and cash equivalents of $1.873 billion, up nearly 5% from the level as of Dec 31, 2019. Long-term debt of $7.7 billion was up 46.7% from 2019-end level.

Total equity was $16.9 billion as of Jun 30, 2010, down 1.8% from 2019 end.

Operating cash flow was $1.4 billion in the first half of 2020, down 0.3% year over year. Free cash flow was $1.1 billion, up 10.9% year over year.

In the first half of 2020, the company returned $1.4 billion to its shareholders.

Third-Quarter 2020 Guidance

Data revenues are estimated between $575 million and $580 million.

Operating expenses are projected in the range of $651-$661 million. Adjusted operating expenses are expected to be in the range of $580 million to $590 million.

Non-operating expense is expected to be in the range of $20 million to $25 million.

Weighted average shares outstanding are anticipated between 542 million and 548 million shares.

2020 View

Operating expenses are predicted in the band of $2.617-$2.667 billion. Adjusted operating expenses are expected to be in the range of $2.32 million to $2.37 million.

Capital expenditures are expected between $350 million and $370 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, ICE has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise ICE has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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