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Intercontinental Exchange Rides on Highly Volatile Energy Markets

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Beats the estimate

As of June 2015, Intercontinental Exchange (ICE) stock has appreciated by about 4% over the past six months. It has appreciated 25% over the last year. The company’s market capitalization has risen to $24.5 billion.

Its 1Q15 earnings saw a 21% rise in EPS (earnings per share) compared to 1Q14. The company beat analysts’ estimates by $0.09 and reported adjusted EPS of $3.06. Its profit grew mainly due to growth across its segments and reduced operating expenses. The company reported total revenue of $1.16 billion in 1Q15—compared to $1.06 billion in 1Q14.

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In a May 5 company press release, Intercontinental chairman and CEO Jeffrey C. Sprecher noted that “We delivered another record quarter by growing revenues and reducing our expense base, while serving our customers’ needs amid a dynamic time. We grew revenues across each major business line, including data services and listings where we posted record revenues, as well as in cash equities and commodities markets. And again this quarter, NYSE led in total capital raised globally. We continue to innovate across all of our businesses to deliver growth and solid returns for our shareholders.”

Here are the two major questions that we investigate in this series:

  • Can Intercontinental Exchange continue to generate higher revenue in the upcoming quarters?
  • Is there more upside to the company’s stock price?

Operates regulated exchanges

Intercontinental Exchange is a global operator of regulated exchanges, clearing houses, and data services for financial and commodity markets. The company’s regulated exchanges include futures exchanges in the US, the United Kingdom, Canada, Singapore, and Europe, three securities exchanges, and two equity options exchanges. It also operates OTC (over-the-counter) markets for physical energy and CDS (credit default swap). The company generated total revenue of $3 billion over the last 12 months compared to its peers:

  • NASDAQ OMX Group (NDAQ) – $3.5 billion
  • CME Group (CME) – $3.1 billion
  • CBOE Holdings (CBOE) – $0.6 billion

Together, these companies form 2.09% of the Financial Select Sector SPDR Fund (XLF).

The company operates marketplaces for trading and clearing an array of securities and derivatives contracts across asset classes including energy and agricultural commodities as well as equities and equity derivatives. Its products and services include regulated energy futures contracts, regulated agricultural futures contracts, regulated financial futures contracts, securities products and listings, credit derivatives products, OTC energy products, Intercontinental Exchange data services, and NYSE data services.

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