On Aug 21, 2014, Zacks Investment Research downgraded
Intercontinental Exchange Inc.
), or ICE Group, by a notch to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
ICE Group has been witnessing downward estimate revisions since
the company's second-quarter 2014 results and a continued sluggish
growth outlook, despite the recent renovation in operations.
Additionally, this global exchange operator underperformed the
one-year S&P 500 index, which recorded growth of 12.7% against
a negative return of 5.1% clocked by the company.
On Aug 7, ICE Group reported second-quarter 2014 operating
earnings per share (EPS) of $2.10, which exceeded the Zacks
Consensus Estimate by 4% but lagged the year-ago quarter figure by
Average daily volumes of total futures and options persistently
fell 20% until July this year, reflecting weakness in average rate
per contract as well. Moreover, higher expenses that spiked 188%
year-over-year more than offset top-line growth of 102%.
Consequently, operating margin deteriorated to 43.6% from 60.5%
in the year-ago quarter. The absence of share buybacks throughout
2013 and the first half of 2014 also limited EPS growth, although
some repurchase activity was undertaken last month.
ICE Group's business consolidation is also incurring higher
operating and capital expenses, the immediate effect of which is
being witnessed in the deteriorating margins. Alongside, though the
company has reduced a chunk of its debt from 2013-end, debt
leverage still remains at cautious level.
ICE Group also faces major headwinds fromintense competition,
weak industry dynamics, challenging regulations and declining
volatility that hurt derivative performance.These factors also
making investors jittery about desirable growth in the
Meanwhile, the Zacks Consensus Estimate for 2014 and 2015
declined 2.4% and 4.5% to $9.00 and $11.22 a share, respectively,
in the last 30 days. No upward estimate revision was witnessed for
both these years.
Moreover, the Most Accurate estimate for ICE Group's 2014 and
2015 earnings currently stand at $8.89 and $10.97 a share,
resulting in an
of -1.2% and -2.2%, respectively, which signal continuous
Financial Stocks that Warrant a Look
While we prefer to avoid ICE Group for the time being,
better-ranked financial stocks like Fortegra Financial Corporation
), Vantiv Inc. (
) and The St. Joe Company (
) are worth considering. All these stocks sporta Zacks Rank #1
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INTERCONTNTLEXC (ICE): Free Stock Analysis
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FORTEGA FIN CP (FRF): Free Stock Analysis
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