On Jun 1, 2016, we issued an updated research report on Intercontinental Exchange, Inc. ICE.
Low interest rates and demand for low-priced products have been reducing trading volumes, thereby posing risks to transaction and clearing revenues that account for the majority of the company’s top line. The company expects futures volumes’ growth to remain sluggish.
Further, Intercontinental Exchange witnessed a significant rise in expenses, owing to acquisitions. This, in turn, has been weighing on the company’s margins. The securities exchange provider anticipates an increase in operating and capital costs primarily due to product launches, higher debt and integration expenses, capital and infrastructural costs, rebates as well as compensation and benefits expenses. Though these elevate the company’s overall costs, these expenses are necessary for it to stay competitive.
Intense competition, challenging regulations and volatile industry trends remain concerns for the company.
However, the insurer’s incremental cash flows and capital position support efficiencies, strategic acquisitions, alliances and divestments, product novelty, and global expansion. The successful integration of New York Stock Exchange (NYSE), timely achievement of cost synergies and steady debt reduction raise optimism.
The securities exchange provider’s first-quarter 2016 earnings outperformed the Zacks Consensus Estimate and also improved year over year. Notably, this quarter was the best one in the company’s history. The bottom-line improvement was backed by growth across the company’s global markets and data services business.
Zacks Rank and Stocks to Consider
Currently, Intercontinental Exchange carries a Zacks Rank #4 (Sell). Some better-ranked stocks from the finance sector are Cincinnati Financial Corp. CINF, Markel Corp. MKL and NMI Holdings, Inc. NMIH. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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