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Is Hold an Apt Strategy for Intercontinental (ICE) Stock?

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Intercontinental Exchange’s (ICE - Free Report) compelling portfolio of products and expansive risk management services, strategic buyouts, solid balance sheet and effective capital deployment bode well for growth.  These, along with favorable growth estimates, make this operator of five cash equity exchanges and two equity options exchanges worth retaining in one’s portfolio.

Intercontinental Exchange has a solid surprise history, having beaten earnings estimates in the last four reported quarters, with the average being 1.98%. The bottom line has witnessed a 16-year CAGR of 17%.

Zacks Rank & Price Performance

Intercontinental currently carries a Zacks Rank #3 (Hold). Year to date, the stock has lost 31.3% compared with the industry’s decrease of 32.1%.

Zacks Investment Research
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Northbound Growth Estimates

The Zacks Consensus Estimate for 2022 earnings is pegged at $5.42, indicating a year-over-year improvement of 5.2% on 4% higher revenues of $7.4 billion. The consensus estimate for 2023 earnings is pegged at $5.85, which indicates a year-over-year improvement of about 8% on 4.8% higher revenues of $7.8 billion.

The expected long-term earnings growth rate is pegged at 9.3%, better than the industry average of 9.1%.

Business Tailwinds

The top line should continue to benefit from its expansive product and service portfolio. The company estimates 5% to 6% growth in Fixed Income and Data Services recurring revenues.

ICE boasts the largest mortgage network across the United States and is thus poised to benefit from accelerated digitization taking place in the U.S. residential mortgage industry. Its decision to buy Black Knight will help consolidate its presence as a provider of end-to-end electronic workflow solutions for the rapidly evolving U.S. residential mortgage industry. Intercontinental estimates Mortgage revenues to grow at an average annual growth rate of 8-10% over the next 10 years while the Mortgage Technology business is expected to grow in the low to mid-teens.

Intercontinental has an impressive inorganic growth story that has also led it to achieve expense synergies. The buyout of mortgage-software firm Ellie Mae and the pending Black Knight buyout, once completed, should help ICE capitalize on the opportunities in the $14 billion addressable market.

With over 5,000 indices representing more than $1 trillion in benchmark assets under management, ICE is the second-largest fixed income provider globally.

A healthy and minimal risk-based balance sheet is likely to continue providing stability and buoyancy over the medium to long term apart from making strategic investments.

By virtue of a strong balance sheet with solid cash and capital position, ICE’s dividend has more than doubled in the last six years.

Stocks to Consider

Some better-ranked stocks from the finance sector are HCI Group, Inc. (HCI - Free Report) , American Financial Group, Inc. (AFG - Free Report) and United Fire Group, Inc. (UFCS - Free Report) . While HCI Group and American Financial sport a Zacks Rank #1 (Strong Buy), United Fire Group carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for HCI Group’s 2022 and 2023 earnings has moved 33.3% and 40% north, respectively, in the past 60 days. In the past year, HCI Group’s stock has lost 29.9%.

The Zacks Consensus Estimate for HCI’s 2022 and 2023 earnings per share indicates a year-over-year increase of 280.9% and 75%, respectively.

American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 41.72%. In the past year, American Financial has gained 12.7%.

The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 9.8% and 6.9% north, respectively, in the past 60 days.

United Fire’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 270.8%. In the past year, UFCS stock has increased 24.8%.

The Zacks Consensus Estimate for UFCS’ 2022 earnings has moved 23.5% north in the past 60 days.