IntercontinentalExchange Group Inc. (ICE): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
ICE Group's fourth-quarter earnings topped the Zacks Consensus Estimate based on remarkably higher top line, driven by the acquisition on NYSE Euronext. However, higher expenses weighed on the margins and cash flow. Weak volumes from NYSE and increased debt amplify financial and operating risks. Yet, ICE Group has been boosting efficiencies through strategic acquisitions, product novelty and expansion in the globally emerging markets. While some caution is maintained given the impact of regulations and volatile industry trends, we believe a high earnings visibility, strong product portfolio, consistent cash generation, disciplined investment and debt reduction should enable ICE Group to be one of the most dynamic companies in the industry. In the long run, these factors are expected to consistently deliver strong shareholder value, justifying our Neutral recommendation.

Overview:

Post the acquisition of NYSE Euronext Inc. in Nov 2013 for about $11 billion, a new holding company - IntercontinentalExchange Group Inc. (ICE Group) - was formed to affect the cash and stock merger between IntercontinentalExchange Inc. and NYSE. ICE Group funded the transaction by 67% in shares and 33% in cash, which was raised through cash and credit facilities. After the acquisition, the NYSE now owns 36% in IntercontinentalExchange, while four members of the former will be part of ICE Group's board. However, both IntercontinentalExchange and NYSE businesses will continue to operate under their respective brand names.

ICE Group has dual-headquarters in Atlanta and New York, with a total of 4,114 employees at the end of Sep 2013. Established in 2000 and headquartered in Atlanta, Georgia, IntercontinentalExchange Inc. owns and operates an Internet-based global electronic marketplace for trading in futures, and over-the-counter (OTC) commodities and derivative financial products. The company is an electronic futures and OTC marketplace for trading in a broad array of energy, soft agricultural and agricultural commodities, credit default swaps (CDS) and financial products.

The transatlantic exchange operates leading regulated exchanges, trading platforms and clearing houses serving the global markets for agricultural, credit, currency, emissions, energy and equity index markets. Through its subsidiaries and about 1,077 professionals, the company serves professional traders, financial institutions, institutional and individual investors, corporations, manufacturers, commodity producers and refiners, and governmental bodies. In 2005, IntercontinentalExchange completed its initial public offering on the New York Stock Exchange and became a member of the Russell 1000 and the S&P 500 indexes.

Headquartered in New York and consummated in Apr 2007, NYSE Euronext Inc. was formed with the merger of NYSE Group Inc., a Delaware corporation and Euronext N.V., a company organized under the laws of the Netherlands. The company offers a broad and growing array of products and services in cash equities, futures, options, swaps, exchange-traded fund (ETF) products, bonds, market data and commercial technology solutions, all designed to meet the evolving needs of issuers, investors, financial institutions and market participants.

Following the acquisition of NYSE, ICE Group operates through five primary revenue segments:

Derivatives (accounted for 49% of 2012 net revenues)

Technology & Other (16%)

Market Data (13%)

Listings (12%)

Cash Equities (10%)

Through its Futures operations, ICE Group offers trading in standardized derivative contracts on its regulated exchanges through ICE Futures U.S., ICE Futures Europe and ICE Futures Canada, NYSE Liffe, NYSE Liffe U.S. and ICE Endex.

The OTC operation provides trading in over-the-counter or off-exchange, energy-related products, and derivative contracts, including contracts that provide for the physical delivery of an underlying commodity or for financial settlement based on the price of an underlying commodity. ICE Group's OTC markets include ICE OTC Energy, Creditex and ArcaEdge.

ICE Group's Cash exchanges offer trading within ETFs, equity and interest rate indices as well as equity options. These markets include New York Stock Exchange, NYSE Arca, NYSE MKT, NYSE Euronext Exchanges, EnterNext, NYSE Alternext, NYSE Arca Europe, NYSE Amex Options, NYSE Arca Options and NYSE Bonds.

ICE Group also offers central Clearing facilities through ICE Clear Europe, ICE Clear U.S., ICE Clear Canada, ICE Clear Credit and The Clearing Corp. In Jul 2013, NYSE Liffe's both trading and clearing operations were successfully merged into ICE Clear Europe, which is UK's first clearinghouse.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: ETF , ICE

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