Back to top

Analyst Blog

IntercontinentalExchange Inc. (ICE - Analyst Report) reached a new 52-week high of $183.07 on Tuesday, higher than the 52-week high of $178.87 on the day before. Yesterday, the the share price of this global derivative exchange operator surged about 35% on a year-over-year basis, while it rose 46.5% on a year-to-date basis, thereby gaining strong traction in past year.

Yesterday’s closing price represents a strong one-year return of about 35.8% and a year-to-date return of about 48.0%. The S&P 500 index jumped 23.0% and 17.8%, respectively during the same period. Average volume of shares traded over the last three months stands at approximately 664.5K.

The improved momentum of this Zacks Rank #3 (Hold) stock is driven by the company’s vigorous efforts to stimulate organic growth across the globe coupled with strong expense control. This has also helped IntercontinentalExchange to remain adequately liquid and simultaneously grow through mergers and acquisitions.

On May 1, IntercontinentalExchange reported its first-quarter earnings per share of $2.03, which comfortably surpassed the Zacks Consensus Estimate of $1.98 and the year-ago quarter number of $2.02. The results also delivered a positive earnings surprise of about 2.5% in the reported quarter, with an average beat of 3.2% in all of the last 4 quarters.

Though IntercontinentalExchange mirrors the low trading volume trend of the industry, the company is growing through strategic acquisitions, product novelty, diversification and expansion in the globally emerging markets. The proposed NYSE Euronext Inc. merger will further boost efficiencies.

Meanwhile, valuation for IntercontinentalExchange appears reasonable. The shares are trading at par with the peer group average on a forward price-to-earnings basis and at 1% premium on a price-to-book basis.

Both the return on equity of 15.5% and return on investment of 12.5% are in line with the peer group average. Even the estimated long-term earnings growth is pegged at 11.6%, only marginally below the peer group average of 11.9%.

Apart from IntercontinentalExchange, other stocks that warrant a look in the exchange services sector include CBOE Holdings Inc. (CBOE - Analyst Report) and MarketAxess Holdings Inc. (MKTX - Snapshot Report). Both these stocks carry a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.