Here's Why You Should Retain Intercontinental Exchange (ICE)

Core Viewpoint - Intercontinental Exchange (ICE) is expected to grow due to its strong portfolio, extensive risk-management services, strategic acquisitions, solid balance sheet, and effective capital deployment [1] Financial Performance - Earnings of ICE have grown by 10% over the last five years, surpassing the industry average of 9.8% [2] - ICE has a solid surprise history, beating earnings estimates in three of the last four quarters with an average surprise of 2.94% [2] - The return on invested capital for ICE in the trailing 12 months was 6.6%, outperforming the industry average of 4.8% [2] Revenue Growth - ICE's top line has been improving, with a five-year compound annual growth rate (CAGR) of 10% [3] - The company anticipates mid-single digit growth in Fixed Income and Data Services recurring revenues [4] Strategic Acquisitions - The acquisition of Black Knight is expected to enhance existing revenue streams and improve the mix of high-growth recurring revenues [4] Market Position - ICE is the second-largest global fixed-income provider, managing over $1 trillion in benchmark assets across more than 5,000 indices [4] Mortgage Industry Trends - The U.S. residential mortgage industry is undergoing accelerated digitization, positioning ICE to benefit from this trend [5] - ICE projects mortgage revenues to grow at an average annual rate of 8-10% over the next decade, while the Mortgage Technology business is expected to grow in the low to mid-teens [5] Earnings Estimates - The Zacks Consensus Estimate for 2024 earnings is $5.95, reflecting a year-over-year increase of 5.9% on revenues of $9.2 billion, with 2025 earnings estimated at $6.59, indicating a 10.7% increase on revenues of $9.7 billion [6] - The long-term earnings growth rate for ICE is currently pegged at 9%, better than the industry average of 8.1% [7] Capital Management - ICE has a healthy balance sheet, which supports strategic investments and wealth distribution to shareholders through share buybacks and dividends [7] - The company has more than doubled its dividends in the last six years and has $2.5 billion remaining under its authorization for share buybacks [7]