Up 24% Since The Start Of 2023, What To Expect From Intercontinental Exchange Stock After Q4 Results?

Intercontinental Exchange (NYSE: ICE) is scheduled to report its fiscal Q4 2023 results on Thursday, February 8, 2024. We expect Intercontinental Exchange to edge past the consensus estimates of revenues and earnings. The exchange posted mixed results in the last quarter, with revenues missing the mark but earnings beating estimates. It reported net revenues (revenue minus transaction-based expenses) of $2 billion, which was 11% more than the year-ago figure. The growth was primarily driven by lower transaction-based expenses, followed by higher fixed income & data services and mortgage technology revenues. We expect the net revenues to see year-on-year growth in Q4 as well. Our interactive dashboard analysis on Intercontinental Exchange’s Earnings Preview has more details.

Amid the current financial backdrop, ICE stock has seen little change, moving slightly from levels of $115 in early January 2021 to around $125 now, vs. an increase of about 30% for the S&P 500 over this roughly 3-year period. Overall, the performance of ICE stock with respect to the index has been lackluster. Returns for the stock were 19% in 2021, -25% in 2022, and 25% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that ICE underperformed the S&P in 2021 and 2022. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Financials sector including V, JPM, and MA, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could ICE face a similar situation as it did in 2021 and 2022 and underperform the S&P over the next 12 months – or will it see a strong jump?

Our forecast indicates that Intercontinental Exchange’s valuation is $140 per share, which is 11% above the current market price of $127. 

(1) Revenues expected to top the consensus estimates

Intercontinental Exchange’s revenues were $7.2 billion in the first three quarters of 2023 – at par with the year-ago figure. It translated into a 5% rise in the net revenues to $5.79 billion, primarily because of lower transaction-based expenses and a 7% rise in the fixed income & data services revenues. Overall, we forecast Intercontinental Exchange’s total revenues to touch $9.7 billion for FY2023.

Trefis estimates Intercontinental Exchange’s fiscal Q4 2023 net revenues to be around $2.25 billion, 2% above the $2.20 billion consensus estimate. 

2) EPS to marginally beat the consensus estimates

Intercontinental Exchange Q4 2023 adjusted earnings per share (EPS) is expected to be $1.32 per Trefis analysis, slightly above the consensus estimate of $1.29. The exchange’s adjusted net income increased 95% y-o-y to $1.99 billion in the first nine months of 2023. It was mainly due to an improvement in the “other income” from -$1.5 billion to -$391 million, partially offset by higher operating costs. Further, we expect the same trend to continue in Q4. Overall, Intercontinental Exchange’s annual EPS figure is likely to be around $5.62 for FY2023. 

(3) The stock price estimate is 11% higher than the current market price

We arrive at Intercontinental Exchange’s valuation, using an EPS estimate of around $5.62 and a P/E multiple of just below 25x in fiscal 2023. This translates into a price of $140, which is 11% above the current market price of around $127. 

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year 

[1] Returns as of 2/6/2024
[2] Cumulative total returns since the end of 2016

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