Intercontinental Exchange (NYSE: ICE) is scheduled to report its fiscal Q2 2022 results on Thursday, August 4, 2022. We expect Intercontinental Exchange to top the revenue estimates, while earnings will likely miss the expectations. The exchange posted better than expected results in the last quarter, with a 6% y-o-y increase in the net revenues (total revenues minus transaction-based expenses). It was primarily due to an 11% decline in the transaction-based expenses, followed by some growth in exchange-driven and fixed income & data services revenues. We expect the second quarter results to be on similar lines.
Our forecast indicates that Intercontinental Exchange’s valuation is $134 per share, which is 33% above the current market price of $100. Our interactive dashboard analysis on Intercontinental Exchange’s Earnings Preview has more details.
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(1) Revenues expected to edge past the consensus estimates
Intercontinental Exchange’s revenues grew 11% y-o-y in 2021 to $9.2 billion, translating into an 18% rise in the net revenues to $7.1 billion. It was primarily driven by a 27% y-o-y increase in the non-trading revenues, followed by a 6% rise in net clearing & transaction fees.
- Clearing & transaction fees contribute close to 40% of the net revenues. The clearing & transaction fees (net) increased 11% y-o-y in Q1 2022. Further, as per the recently released second-quarter statistics, the total average daily volume (ADV) has increased 12% y-o-y in Q2. It will likely benefit the segment in the second quarter.
- ICE generates roughly 60% of the net revenues from non-trading income. The segment grew 27% y-o-y in 2021, mainly due to high growth in the mortgage technology business. However, the stream witnessed a slight decrease in the first quarter of 2022 because of lower mortgage technology revenues, offsetting the growth in the fixed income & data services category. We expect the non-trading revenues to increase in Q2.
- Overall, Intercontinental Exchange’s revenues (total) are estimated to touch $9.5 billion in FY2022.
Trefis estimates Intercontinental Exchange’s fiscal Q2 2022 net revenues to be around $1.83 billion, just above the $1.80 billion consensus estimate.
2) EPS is likely to remain slightly below the consensus estimates
Intercontinental Exchange Q2 2022 adjusted earnings per share (EPS) is expected to be $1.24 per Trefis analysis, marginally below the consensus estimate of $1.27. The exchange’s profitability figures improved almost 100% y-o-y in 2021. It was because of the revenue growth and other income (net) of $2.7 billion. On the flip side, the other income decreased from $48 million to -$58 million in the first quarter of 2022, partially offsetting the positive effect of growth in the top line. It led to an adjusted net income of $657 million – up 2% y-o-y. We expect the same trend to continue in the second quarter. Overall, Intercontinental Exchange’s annual GAAP EPS figure is likely to be around $5.37 for FY2022.
(3) Stock price estimate is 33% higher than the current market price
We arrive at Intercontinental Exchange’s valuation, using an EPS estimate of around $5.37 and a P/E multiple of close to 25x in fiscal 2022. This translates into a price of $134, which is 33% above the current market price of around $100.
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
With inflation rising and the Fed raising interest rates, Intercontinental Exchange has fallen 27% this year. Can it drop more? See how low can Intercontinental Exchange stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||0%||-14%||84%|
|Trefis Multi-Strategy Portfolio||0%||-13%||242%|
 Month-to-date and year-to-date as of 8/2/2022
 Cumulative total returns since the end of 2016
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