Data Services Continue To Propel ICE’s Top-line; Trading Volumes Suffer Decline

+2.03%
Upside
137
Market
140
Trefis
ICE: Intercontinental Exchange logo
ICE
Intercontinental Exchange

IntercontinentalExchange Group (NYSE:ICE) continued its impressive performance in Q3, with Data Services segment being the major contributor to revenue growth. We believe there is an increasing demand for powerful insights and analytics-driven recommendations, and the company’s acquisitions of SuperDerivatives , IDC and Trayport in this regard seem to be a good strategic fit. The acquisitions are likely to expand the markets served by the company, add technology platforms and increase risk management, new data and valuation services. However, transaction fees, which constitutes over 55% of the company’s overall revenue, has suffered some headwinds due to reduced volatile market conditions. With the possibility of improvement in the U.S. macro conditions, the trading volumes are likely to improve in the coming quarters.

ICE

Our price estimate for Intercontinental Exchange stands at $268, which is nearly in-line with the market. We are currently reviewing our estimates in the light of recent earnings, and will have an update ready soon.

Relevant Articles
  1. Up 24% Since The Start Of 2023, What To Expect From Intercontinental Exchange Stock After Q4 Results?
  2. Up 7% In The Last One Month, Where Is Intercontinental Exchange Stock Headed?
  3. Where Is Intercontinental Exchange Stock Headed?
  4. Intercontinental Exchange Stock Is Trading Below Its Fair Value
  5. Intercontinental Exchange Stock To Edge Past the Expectations In Q4
  6. Forecast Of The Day: Intercontinental Exchange Data Services Revenue

Data Services Revenue Rises Enormously Due To Acquisitions And Increased Demand

The company’s data services segment has seen over 40% (~$850 million) growth in revenues for the year so far, around $600 million of which is supported by a series of acquisitions. With the segment having doubled its percentage contribution in the overall revenue in comparison to the previous year to around 35%, we believe increased demand for data-related products and services is likely to propel further growth in this segment in future.

Trading Volumes Suffer Due to Unfavourable Macro Conditions

Transaction Fees segment, which grew over 13% in the first half of the year, saw a 5% year over year decline in Q3. The uncertain macro conditions in the country has encouraged investors to divert attention towards safer investment alternatives. Also, the Chinese economy slowdown had led to a surge in trading volume in 2015, and the impact was absent this year thus making comparison a little difficult.

We saw a 3% growth in metal and energy derivative volumes, owing to continued volatility from demand-supply gap, and 8% growth in financial derivatives, primarily due to the likelihood of interest rate hike in 2017 driving the interest rate derivative volumes. However, the company’s cash equity activity declined due to lack of investors’ interest in the wake of uncertain macro conditions.

With the possibility of improvement in these conditions, the trading volumes are likely to improve in the coming quarters.

View Interactive Institutional Research (Powered by Trefis):
Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap
More Trefis Research