Intercontinental Exchange Inc. (ICE): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

By Zacks Investment Research,

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We are downgrading our recommendation on ICE to Neutral based on significant volumes reduction throughout 2014. Stiff competition, challenging regulations and volatile industry trends also raise concerns. In the long run, a strong product portfolio, disciplined investment and improved industry dynamics will shore up shareholder value. Its third-quarter earnings outpaced the Zacks Consensus Estimate, thanks to revenue growth across segments. Incremental cash flow boosts efficiencies, making way for strategic acquisitions, alliances and divestments, product novelty and global expansion. It also allowed the resumption of share buyback. The successful integration of NYSE, timely achievement of cost synergies and steady debt reduction also strengthened ratings. Top line shored up primarily due to NYSE acquisition, while signaling absence of comparable growth parameters. Meanwhile, lower volumes and higher expenses continued to drag margins.


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, NYSE now owns 36% in IntercontinentalExchange, while four members of the former will be part of ICE's board.

In Jun 2014, the company was rebranded as Intercontinental Exchange Inc. (ICE). However, both IntercontinentalExchange and NYSE businesses will continue to operate under their respective brand names.

ICE has dual headquarters in Atlanta and New York and operates through 17 globally regulated exchanges, with a total of 4,232 employees at the end of 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, 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 generates revenues from four primary sources:

Transaction and Clearing Fees (accounted for 78% of 2013 total revenue)

Market Data Fees (12%)

Listing Fees (2%)

Other Revenue (8%)

Through its Futures operations, ICE 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's OTC markets include ICE OTC Energy, Creditex and ArcaEdge.

ICE'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 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 the U.K.'s first clearinghouse.

Intercontinental Exchange Inc. (ICE): Read the Full Research Report
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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 Nasdaq, Inc.

This article appears in: Investing Stocks
Referenced Stocks: ETF , ICE

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