Global exchange operator – Intercontinental Exchange Inc. ICE – is scheduled to release first-quarter 2015 financial results before the opening bell on May 5, 2015. In the last reported quarter, the company delivered a positive earnings surprise of 1.97%. Let us see how things are shaping up for this announcement.
Factors Affecting the Past Quarter
ICE has successfully streamlined its organic growth profile by launching 107 energy contracts along with five new forex contracts in first-quarter 2015, thereby strengthening its product portfolio.
Realization of cost synergies and improved operating leverage are likely to boost bottom line. Moreover, share buybacks are likely to reduce share count and boost earnings per share. Additionally, successful acquisitions and integrations are making way for more revenue generation. Hence, these, along with extensive global expansions are expected to contribute positively to earnings.
However risks from persistently weak trading volumes cannot be overlooked. Although the company has been expanding its clearing and technology businesses, its derivative volumes declined 24% in March. However, cash equities and derivative volumes from NYSE increased 6% while equity options declined 32%. Stiff competition, currency fluctuations and challenging regulations are other obstacles for this transatlantic exchange.
Earnings Whispers
Our proven model does not conclusively show that Intercontinental Exchange is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: ICE has a negative ESP of -1.00%. That is because the Most Accurate Estimate stands at $2.96, while the Zacks Consensus Estimate is pegged higher at $2.99.
Zacks Rank: ICE has a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, a negative ESP makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Rank #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
RenaissanceRe Holdings Ltd. RNR has anearnings ESP of +0.81% and a Zacks Rank #2(Buy).
American Capital, Ltd. ACAS has an earnings ESP of +10.00% and a Zacks Rank #2.
The Allstate Corporation ALL has an Earnings ESP of +3.60% and Zacks Rank #3.
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