On Jun 28, 2014, Zacks Investment Research downgraded
IntercontinentalExchange Group Inc.
), or ICE Group, by two notches to a Zacks Rank #5 (Strong Sell)
from Zacks Rank #3 (Hold).
Why the Downgrade?
ICE Group has been witnessing downward estimate revisions since
the company's first-quarter 2014 results and a sluggish growth
outlook, despite the ongoing business restructuring initiatives.
Additionally, this global exchange operator underperformed the
one-year S&P 500 index, which recorded growth of 11.2% against
a negative return of 4.6% clocked by the company.
On May 8, ICE Group reported first-quarter 2014 operating
earnings per share (EPS) of $2.60, which was in line withthe Zacks
Consensus Estimate but higher than the prior-year quarter figure by
While the top line grew a whopping 165%, total expenses spiked
244%, both on a year-over-year basis. As a result, operating margin
deteriorated to 43.9% from 56.8% in the year-ago quarter. Moreover,
average daily volumes of total futures and options fell 18% till
May 2014 this year, reflecting weakness in average rate per
contract as well. The absence of share buybacks throughout 2013 and
the first quarter of 2014 also limited EPS growth.
Though ICE Group has been actively consolidating its business
post the NYSE acquisition, it faces major headwinds in the form
ofintense competition, weak market dynamics and higher financial
leverage. Poor volumes coupled with higher operating expenses, tax
rate and capital expenditure, projected in the upcoming quarters,
further signal added risk to margins. These factors also making
investors jittery about desirable growth in the near-term.
Meanwhile, the Zacks Consensus Estimate for 2014 and 2015
declined 12.5% and 9.8% to $9.67 and $12.13 a share, respectively,
in the last 60 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 $9.23 and $11.65 a share,
resulting in an
of -4.6% and -4.0%, respectively, which depict a slow growth
Other Worthy Financial Stocks
While we prefer to avoid ICE Group for the time being,
better-ranked financial stocks like
Fidelity National Information Services Inc.
VeriFone Systems Inc.
Total System Services Inc.
) are worth considering. All these stocks sporta Zacks Rank #1
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INTERCONTNTLEXC (ICE): Free Stock Analysis
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