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Intercontinental Exchange (ICE) Q4 Earnings: What to Expect

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Intercontinental Exchange, Inc. (ICE - Free Report) is slated to report fourth-quarter 2018 results on Feb 7, before the market opens. In the last reported quarter, the company delivered a positive surprise of 6.25%.

Intercontinental Exchange is likely to display top-line growth in the to-be-reported quarter, driven by higher revenues across transaction and clearing plus data and listings segments along with accelerated strength in listings business. The Zacks Consensus Estimate for revenues is pegged at $1.3 billion, representing an 11.9% increase on a year-over-year basis.

Probable improvement in revenues, contributions from strategic investments and a lower tax rate (estimated to range between 23% and 24%) and consistent share buybacks might have boosted the bottom line. The Zacks Consensus Estimate for the metric stands at 92 cents per share, reflecting 26% rise from the year-ago period.

Riding on the strength of continued strong pricing and analytics plus a favorable performance at connectivity and feeds business, the company is expected to have witnessed better data revenues in the to-be-reported period. The Zacks Consensus Estimate for data service fees is pegged at $538 million, up 4.5% year over year.

Last October, the company purchased the remaining minority stake in Mortgage Electronic Registrations Systems, Inc. (MERS) that has become the foundation of ICE Mortgage Services. With the inclusion of ICE Mortgage Services in Trading & Clearing segment, the company is likely to witness a decline in other income, lower by approximately $6 million in the fourth quarter, sequentially.

However, the company anticipates incremental revenues associated with ICE Mortgage Services between $17 million and $19 million in the fourth quarter.

Notably, in the fourth quarter, Intercontinental Exchange delivered robust average daily volume (ADV), improving 20% year over year, attributable to better numbers across all the months of the period.

The company has likely experienced solid revenues in trading and clearing segment, mainly fueled by volume expansion and a resilient revenue per contract (RPC), which gained from a favorable product mix.

Intercontinental Exchange’s projected increase in expenses is due to higher compensation and benefits, acquisition-related transaction and integration as well as technology and communication costs. This in turn, might restrict margin expansion, hurting the company’s overall performance in turn.

In the fourth quarter, the company expects interest expenses to be $73 million with the expenses related to MERS in the band of $9-$10 million during the same time period.

What Our Quantitative Model States

Our proven model does not conclusively show that Intercontinental Exchange is likely to beat on earnings this to-be-reported period. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: Intercontinental Exchange has an Earnings ESP of -0.64%. This is because the Most Accurate Estimate is pegged at 91 cents, lower than the Zacks Consensus Estimate of 92 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.  

Zacks Rank: Intercontinental Exchange carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company also needs a positive ESP to be confident about an expected earnings surprise. Therefore, this combination leaves surprise prediction inconclusive.

We caution against the Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks worth considering from the finance sector with the perfect mix of elements to surpass estimates this time around are as follows:

Willis Towers Watson Public Limited Company (WLTW - Free Report) is set to report fourth-quarter earnings on Feb 7 and has an Earnings ESP of +0.63%. The company carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Radian Group Inc. (RDN - Free Report) has an Earnings ESP of +3.03% and a Zacks Rank of 1. The company is anticipated to release fourth-quarter earnings on Feb 8.

AerCap Holdings N.V. (AER - Free Report) has an Earnings ESP of +6.84% and a Zacks Rank #2. The company is slated to announce fourth-quarter earnings on Feb 14.

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