On Oct 3, we reiterated our recommendation on
) at Neutral based on its business expansion initiatives that
drives operating leverage. However, impact of regulations and
volatile industry trends raise caution.
Why the Retention?
Estimates for IntercontinentalExchange have remained steady
since the company reported its second-quarter 2013 results on Aug
6. The company's earnings per share of $2.19 and revenues of
$371.6 million breezed past the Zacks Consensus Estimate by 0.9%
and 0.4%, respectively.
Moreover, both the top and bottom line surpassed the year-ago
results by 5.8% and 12.3%, respectively, based on improved
volumes from futures contracts and higher revenue from the credit
default swaps (CDS) business. However, higher-than-expected
expenses weighed on the margins, although cash flow
Following the release of the second-quarter results, the Zacks
Consensus Estimate for 2013 edged down 4.1% to $8.19 per share in
the last 60 days. Additionally, the Zacks Consensus Estimate for
2014 inched down 0.8% to $9.52 a share. With the Zacks Consensus
Estimate for both 2013 and 2014 showing slight downward pressure
on the stock in the near term, the company now has a Zacks Rank
Moreover, the Most Accurate Estimate for
IntercontinentalExchange's 2013 earnings stands at $8.11 a share,
resulting in an
Intense global competition coupled with increased regulatory
compliances and currency fluctuations deter the desired upside in
the stock. However, despite these challenges,
IntercontinentalExchange's growth is sustained by its consistent
inorganic growth, diversified business mix, strong capital
position, meaningful exposure in emerging markets and impressive
Although the raised debt for
NYSE Euronext Inc.
) acquisition is likely to deteriorate the financial leverage
substantially in the near term,management expects to improve it
to below 1.5x soon enough. However, the ratings agencies are wary
of the integration and execution of the merged entity, which
promises to have a vast scale of operations.
Other Financial Stocks That Warrant a Look
While we prefer to remain on the sidelines regarding
IntercontinentalExchange, other outperforming stocks in the
financial sector include
Official Payments Holdings Inc.
Total System Services Inc.
). Both these stocks carry a Zacks Rank #1 (Strong Buy).
INTERCONTINENTL (ICE): Free Stock Analysis
NYSE EURONEXT (NYX): Free Stock Analysis
OFFICIAL PAYMNT (OPAY): Get Free Report
TOTAL SYS SVC (TSS): Free Stock Analysis
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