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Intercontinental Up on Initiatives & Solid Capital Position

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Intercontinental Exchange, Inc. (ICE - Free Report) is currently riding on actions intended to upgrade the product portfolio and a solid capital position.

The company has a decent surprise history. It surpassed estimates in three of the trailing four quarters, the average positive surprise being 4.3%. The Zacks Consensus Estimate for current-quarter earnings has been revised 1.9% upward over the past 30 days.

Factors Driving Intercontinental Exchange

The company continues to benefit from a solid product portfolio equipped with a wide variety of risk management services. As a result, revenues have witnessed a CAGR of 9.3% in the last five years (2014-2019). Revenues are also likely to benefit from existing strength in global data services.

Intercontinental Exchange reported strong volume growth for February. Average daily volumes (ADV) in the month increased 39% to 7.6 million, largely backed by improved Financial ADV, Commodities ADV and Energy ADV.

Furthermore, Intercontinental Exchange is on track to enhance its product portfolio on a continual basis. Last month, the company revealed plans to extend ties with S&P Global Platts for introducing a version of its market data platform. The platform — ICE Connect — is aimed at improving the risk management capabilities of customers. Also, it announced plans in January to launch a data service in the second half of 2020, intended to assist investors in assessing environmental, social and governance (ESG) risks.

Intercontinental Exchange also enjoys a robust capital position. Evidently, the company’s operating cash flow witnessed a CAGR of 12.9% in the last two years (2017-2019). The metric also improved 5% year over year in 2019 on the back of operational excellence.  Notably, it generated free cash flow of $2.3 billion in 2019 and returned more than 90% of that cash to shareholders via dividends and share repurchases.

However, elevated operating expenses due to several initiatives are significantly concerning.

Shares of this Zacks Rank #3 (Hold) company have gained 22.2% in the past year, underperforming the industry’s rise of 24.3%. Nonetheless, we believe that the company’s strong fundamentals will drive its shares, going forward.

Stocks to Consider

Some better-ranked stocks from the same space are Cboe Global Markets, Inc. (CBOE - Free Report) , MarketAxess Holdings Inc. (MKTX - Free Report) and Nasdaq, Inc. (NDAQ - Free Report) . All three stocks beat the Zacks Consensus Estimate in the last reported quarter by 9.01%, 1.54% and 1.57%, respectively.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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