Earnings Scorecard: Intercontinental Exchange 2017Q3
- Intercontinental Exchange reported another stable quarter.
- Although the company reported an in-line revenue number and the data business seems to be growing well.
- Management needs to continue its M&A strategy to bolster that data business.
Intercontinental Exchange (ICE) reported a stable earnings report in line with most expectations. ICE is one of those reliable companies that always delivers for investors and has stable growth with recurring its revenue business model. The company reported an earnings beat of $0.73/share versus estimates of $0.70/share. In terms of revenue, the owner and operator of the NYSE generated $1.14 billion which was in-line with analyst estimates. This revenue number is up 5.6% from the previous year which is some pretty consistent growth.
Intercontinental Exchange’s revenue segments posted good growth numbers. Trading revenue was up 8% with $523 million. While the Data & Listing Business for ICE posted modest growth of 4% with $623 million. ICE reported a good operating margin of 52% and is on track on finishing integrating its acquisition of Interactive Data Corporation. Management actually has revised up the synergies that the company will expect to generate up from $60 million to $70 million. Management is going to use those saved costs to reinvest in the company. The acquisition of Interactive Data has really helped diversify ICE’s revenue base away from trading revenue. Also with IPOs, those things have cycles especially if there is a bear market or unfavorable market conditions. So there is always need for management to keep continuing using its M&A strategy to ensure that ICE’s revenue segments are diversified. ICE has recently acquired Virtu Financial’s Bondpoint and also took a 4.7% stake in Euroclear, a provider in post trade services.
Management also returned capital to shareholders with a new share buyback of $1.2 billion which is going to start in 2018. The company’s board of directors also declared a dividend of $0.20/share. Overall, the earnings report was probably what most analysts expected from the company. Although revenue came in-line with most estimates I would really like to see a bit more acceleration of revenue especially from the Data business.
Grade: B
Estimates: Earnings- $0.73/share; Revenue- $1.16 billion on Estimize
Disclosure: Cresco Investments is long Intercontinental Exchange (Stock Ticker: ICE)
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: This article is intended for information, engagement & entertainment purposes only, and is not to be construed as investment advice or direction. Investors are strongly encouraged to perform due diligence and/or consult with their financial advisor.
