Intercontinental Exchange, Inc.ICE is slated to report third-quarter 2018 results on Oct 31, before the market opens. Last reported quarter, the company delivered a positive earnings surprise of 1.12%.
Why a Likely Positive Surprise?
Our proven model clearly shows that Intercontinental Exchange has the right combination of the following two key ingredients to beat estimates this earnings season.
Intercontinental Exchange Inc. Price and EPS Surprise
Zacks Rank : Intercontinental Exchange carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP as stocks with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 along with a positive Earnings ESP have significantly higher chances of an earnings beat.
Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Factors Driving the Better-Than-Expected Earnings
Intercontinental Exchange is likely to report top-line growth in the to-be-reported quarter, driven by higher revenues across transaction and clearing as well as data and listings segments along with accelerated strength in its listings business. The Zacks Consensus Estimate for revenues is pegged at $1.2 billion, representing a 4.3% increase on a year-over-year basis.
Moreover, the company has likely displayed bottom-line improvement, primarily driven by probable higher revenues, a possible decline in expenses, contributions from strategic investments and a lower tax rate (anticipated to be around 24%). Also, continued share buyback might have boosted the bottom line. The Zacks Consensus Estimate for the metric is pegged at 80 cents per share, reflecting an 11.1% rise from the year-ago period.
On the back of consistently strong pricing and analytics plus a favorable performance at connectivity and feeds business, the company is likely to have witnessed better data revenues in the to-be-reported period. The Zacks Consensus Estimate for data service fees stands at $531 million, up 2.5% year over year.
Notably, Intercontinental Exchange delivered a record average daily volume (ADV) in the third quarter.
The company has likely experienced higher revenues in trading and clearing segment, mainly fueled by volume expansion and a resilient revenue per contract (RPC), which gained from a favorable product mix.
Intercontinental Exchange's probable increase in expenses is attributable to higher compensation and benefits, acquisition-related transaction and integration as well as technology and communication costs. This in turn, might restrict margin expansion, hurting the company's overall performance in turn.
For the third quarter, the company projects adjusted operating expenses to range between $520 million and $525 million while interest expense is anticipated to be $67 million in the same time frame.
Other Stocks to Consider
Some other stocks worth considering from the finance sector with the right combination of elements to surpass estimates this time around are as follows:
Willis Towers Public Limited Company WLTW is set to report third-quarter earnings on Nov 2 and has an Earnings ESP of +3.91%. The company is a Zacks #3 Ranked player. You can see the complete list of today's Zacks #1 Rank stocks here.
CNA Financial Corporation CNA has an Earnings ESP of +4.19% and a Zacks Rank of 2. The company is set to release third-quarter earnings on Nov 5.
Prudential Financial, Inc. PRU has an Earnings ESP of +0.13% and a Zacks Rank #2. The company is set to announce third-quarter earnings on Nov 7.
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