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Intercontinental Stock Near 52-Week High: What Investors Should Know?
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Shares of Intercontinental Exchange (ICE - Free Report) closed at $162.60 on Thursday, near its 52-week high of $162.92, after having gained 26.6% year to date. Shares outperformed the industry, the Finance sector as well as the Zacks S&P 500 composite index in the same time frame.
ICE's compelling portfolio, expansive risk-management services, strategic buyouts, solid balance sheet and effective capital deployment poise it well for growth.
Earnings of ICE grew 10% in the last five years, better than the industry average of 9.8%. Intercontinental has a solid surprise history. It beat earnings estimates in three of the last four reported quarters and matched in one, the average being 2.35%.
Seven of the nine analysts covering the stock have raised estimates for 2024, and five out of nine have raised the same for 2025 over the past 30 days. Two analysts have lowered the estimates for both 2024 and 2025.
The Zacks Consensus Estimate for 2024 and 2025 earnings has moved up 1.3% and 1% in the past 60 days, reflecting analysts’ optimism.
The Zacks Consensus Estimate for 2024 implies a 7.5% year-over-year increase, while the same for 2025 suggests a 10.5% increase.
Can the Stock Retain the Momentum?
ICE has an expansive and compelling product and a broad range of risk management services. Strength in global data services continues to drive the top line. Increased activity owing to continued interest rate volatility, strength in index business, growth in pricing and reference data business, and strength in ICE Global Network offering, coupled with solid desktop, feeds and derivatives analytics revenues, are likely to boost its data revenues in the days ahead.
Intercontinental boasts of being the second-largest global fixed-income provider with more than 5,000 indices representing more than $1 trillion in benchmark assets under management. ICE estimates to grow total Fixed Income & Data Services recurring revenues around the middle of the mid-single-digit guidance range, an improvement from 3% growth in 2023.
ICE has the largest mortgage network across the United States and thus remains well poised to benefit from accelerated digitization in the residential mortgage industry.
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
The long-term earnings growth rate is currently pegged at 9.4%, better than the industry average of 8.5%.
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.
ICE regularly distributes 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.
ICE’s Return on Capital
Return on invested capital (ROIC) has increased every year. This reflects ICE’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 6.1%, higher than the industry average of 4.9%.
Concerns Regarding ICE
Despite the upside potential, there are a few factors that investors should keep an eye on.
Operating expenses have been increasing over the last several years, weighing on margin expansion. We believe that expenses are likely to remain elevated in the near term, given several strategic initiatives, including product launches and technology upgrades, as well as higher debt and integration expenses. ICE estimates GAAP operating expenses between $4.90 billion and $4.93 billion in 2024, up from $4.87 billion and $4.90 billion guided earlier. Adjusted operating expenses are projected to be between $3.79 billion and $3.82 billion.
Though the debt balance declined, the leverage as well as times interest earned compares unfavorably with the industry average.
ICE’s trailing 12-month ROE of 12.7% is weak when compared with the industry average of 13.2%, reflecting its inefficiency in using shareholders' funds.
ICE Shares Are Expensive
The stock is overvalued compared to its industry. It is currently trading at a price-to-earnings multiple of 25.13, higher than the industry average of 23.94.
However, shares of other players from the same space, like CME Group (CME - Free Report) and Cboe Global Markets (CBOE - Free Report) , are trading at a discount to the industry average.
Conclusion
Intercontinental is set to grow on a solid portfolio, a wide range of risk management services, cost synergies and a solid capital position.
Image: Bigstock
Intercontinental Stock Near 52-Week High: What Investors Should Know?
Shares of Intercontinental Exchange (ICE - Free Report) closed at $162.60 on Thursday, near its 52-week high of $162.92, after having gained 26.6% year to date. Shares outperformed the industry, the Finance sector as well as the Zacks S&P 500 composite index in the same time frame.
ICE's compelling portfolio, expansive risk-management services, strategic buyouts, solid balance sheet and effective capital deployment poise it well for growth.
Earnings of ICE grew 10% in the last five years, better than the industry average of 9.8%. Intercontinental has a solid surprise history. It beat earnings estimates in three of the last four reported quarters and matched in one, the average being 2.35%.
Intercontinental Exchange Outperforms Industry, Sector & S&P YTD
Image Source: Zacks Investment Research
Mixed Analyst Sentiment for ICE
Seven of the nine analysts covering the stock have raised estimates for 2024, and five out of nine have raised the same for 2025 over the past 30 days. Two analysts have lowered the estimates for both 2024 and 2025.
The Zacks Consensus Estimate for 2024 and 2025 earnings has moved up 1.3% and 1% in the past 60 days, reflecting analysts’ optimism.
The Zacks Consensus Estimate for 2024 implies a 7.5% year-over-year increase, while the same for 2025 suggests a 10.5% increase.
Can the Stock Retain the Momentum?
ICE has an expansive and compelling product and a broad range of risk management services. Strength in global data services continues to drive the top line. Increased activity owing to continued interest rate volatility, strength in index business, growth in pricing and reference data business, and strength in ICE Global Network offering, coupled with solid desktop, feeds and derivatives analytics revenues, are likely to boost its data revenues in the days ahead.
Intercontinental boasts of being the second-largest global fixed-income provider with more than 5,000 indices representing more than $1 trillion in benchmark assets under management. ICE estimates to grow total Fixed Income & Data Services recurring revenues around the middle of the mid-single-digit guidance range, an improvement from 3% growth in 2023.
ICE has the largest mortgage network across the United States and thus remains well poised to benefit from accelerated digitization in the residential mortgage industry.
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
The long-term earnings growth rate is currently pegged at 9.4%, better than the industry average of 8.5%.
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.
ICE regularly distributes 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.
ICE’s Return on Capital
Return on invested capital (ROIC) has increased every year. This reflects ICE’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 6.1%, higher than the industry average of 4.9%.
Concerns Regarding ICE
Despite the upside potential, there are a few factors that investors should keep an eye on.
Operating expenses have been increasing over the last several years, weighing on margin expansion. We believe that expenses are likely to remain elevated in the near term, given several strategic initiatives, including product launches and technology upgrades, as well as higher debt and integration expenses. ICE estimates GAAP operating expenses between $4.90 billion and $4.93 billion in 2024, up from $4.87 billion and $4.90 billion guided earlier. Adjusted operating expenses are projected to be between $3.79 billion and $3.82 billion.
Though the debt balance declined, the leverage as well as times interest earned compares unfavorably with the industry average.
ICE’s trailing 12-month ROE of 12.7% is weak when compared with the industry average of 13.2%, reflecting its inefficiency in using shareholders' funds.
ICE Shares Are Expensive
The stock is overvalued compared to its industry. It is currently trading at a price-to-earnings multiple of 25.13, higher than the industry average of 23.94.
However, shares of other players from the same space, like CME Group (CME - Free Report) and Cboe Global Markets (CBOE - Free Report) , are trading at a discount to the industry average.
Conclusion
Intercontinental is set to grow on a solid portfolio, a wide range of risk management services, cost synergies and a solid capital position.
Given its premium valuation, unfavorable ROE and margin pressure, it is better to adopt a cautious stance for the Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank stocks here.
Investors who already hold ICE stock should retain it, while new investors can wait for a better entry point given its growth prospects.