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ICE beats on Q2 revenues and earnings, announces stock split and $1 bn buyback

Intercontinental Exchange (ICE), one of the largest global stock and derivative exchange operators, issued solid financials for the second quarter of 2016. Total net revenues soared 42% y-o-y to $1.13 bn and surpassed consensus estimate of $1.12 bn. This growth reflects a massive increase of 142% in data services revenues to a record $497 mn supported by the Interactive Data acquisition. Transaction and clearing revenues rose 15% to $860 mn. Also, listings revenues increased nearly 4% to a record $103 mn, thereby adding to overall growth. Operating income increased 28% to $551 mn, and operating margin came in at 49%. Adjusted earnings per share climbed 18.3% to $3.43 beating analysts’ average projection of $3.38.

ICE exited the quarter with cash and cash equivalents of $390 mn and long-term debt of $4.7 bn. The company generated cash flows from operations of $1.1 bn for the first six months of 2016, up 43% y-o-y, while capital expenditure totaled $38 mn for the same period.

ICE returned over $200 mn via dividends in the first half of 2016, with the quarterly dividend of 85 cents per share offering annualized dividend yield of 1.3%. Besides, the company’s board of directors approved a 5-for-1 stock split to enhance trading efficiency and accessibility and a new $1 bn share buyback program.

My outlook for ICE remains optimistic. The company’s Q2 performance represents its seventh consecutive quarter of double-digit earnings growth driven by disciplined expense management, strategic acquisitions and consistent focus on organic growth initiatives. Timely achievement of cost synergies and global expansion strategy are expected to contribute positively to earnings. Alongside, strong operating cash flow and improved financial leverage will also help maintain a healthy balance sheet.

Solid Q2 results helped ICE shares to break $270 resistance level. The stock, in my opinion, is well positioned to continue to rise and hit $300 mark in medium term.