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ICE (ICE) Up 3.6% 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 3.6% 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.

Interconinental Exchange Q1 Earnings Beat Estimates

Intercontinental Exchange, Inc. reported first-quarter 2019 adjusted earnings per share of 92 cents, beating the Zacks Consensus Estimate of 89 cents by 3.4%. Also, the bottom line improved 2.2% on a year-over-year basis.

On a GAAP basis, net income was 85 cents per share, up 8% year over year.

The company witnessed growth in subscription-based Data & Listings business, which offset muted trading activity.

Performance in Detail    

Intercontinental Exchange’s revenues of $1.270 billion increased 4% year over year on higher revenues at transaction and clearing (3%), data services (5%), listings segments (27%) and other revenues (20.8%). Moreover, the top line outpaced the Zacks Consensus Estimate of $1.269 billion.

Total operating expenses rose 5.2% year over year to $605 million, primarily due to higher compensation and professional services. Adjusted operating expenses were $528 million in the first quarter, up nearly 6.9% from the year-ago quarter’s figure.

Adjusted operating income improved 1.5% year over year to $742 million. Adjusted operating margin was 58%, down 200 basis points from the year-ago quarter.

Trading and Clearing's adjusted operating income of $408 million grew 0.7% year over year while adjusted operating margin contracted 100 basis points. Data and Listings' adjusted operating income rose 2.5% year over year to $334 million while adjusted operating margin of 51% contracted 100 basis points.

Financial Update

As of Mar 31, 2019, Intercontinental Exchange had cash and cash equivalents of $1.5 billion, down 1.4% from the level as of Dec 31, 2018.

Long-term debt of $6.5 billion was up 0.03% from 2018-end level.

Total equity was $17.1 billion as of Mar 31, 2019, up 0.6% from $16.9 billion as of Dec 31, 2018.

Operating cash flow was $654 million, up 14% year over year. Free cash flow was $624 million, up 18% year over year.

Share Repurchase and Dividend Update

In the quarter, the company bought back shares worth $440 million and paid dividends amounting to $157 million.

Second-Quarter 2019 Guidance

Data revenues are estimated between $550 million and $555 million.
Operating expenses are projected in the range of $615-$625 million. Adjusted operating expenses are expected to be in the range of $537 million to $547 million.

The company expects interest expense of $71 million in the period.

Weighted average shares outstanding are anticipated between 563 million and 569 million shares.

2019 Outlook

Operating expenses are predicted in the band of $2.46-$2.49 billion. Adjusted operating expenses are expected to be in the range of $2.15 million to $2.18 million.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, 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 trending upward for the stock, and the magnitude of this revision looks promising. Notably, ICE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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