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

By
A A A

Summary:
ICE Group's second-quarter earnings topped the Zacks Consensus Estimate but lagged the prior-year quarter figure due to lower volumes and higher expenses, which also deteriorated margins. Top line surged year over year due to NYSE acquisition but also showed absence of comparable growth parameters. Intense competition, challenging regulations and volatile industry trends also raise concerns. However, incremental cash flow boost efficiencies, paving way for strategic acquisitions and divestments, product novelty and global expansion. Resumption of share buybacks also support high earnings visibility. Although strong product portfolio, disciplined investment, debt reduction and improvement in industry dynamics should enable ICE Group to deliver strong shareholder value in the long run, near term remains cautious, justifying our Underperform 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 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 Group 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 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.


IntercontinentalExchange Group Inc. (ICE): Read the Full Research Report
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

INTERCONTNTLEXC (ICE): Free Stock Analysis Report

To read this article on Zacks.com click here.



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

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

100%
100%

Most Active by Volume

106,677,560
  • $17.03 ▲ 0.47%
101,357,777
  • $38.65 ▼ 5.57%
61,830,117
  • $89.89 ▼ 4.26%
54,116,071
  • $5.11 ▼ 4.49%
50,121,934
  • $101.06 ▲ 0.10%
49,993,927
  • $3.52 ▼ 1.40%
47,717,687
  • $11.44 ▼ 4.67%
44,793,169
  • $99.05 ▼ 0.93%
As of 9/22/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com