Hold Intercontinental Exchange To Boost Your Portfolio

Shares of Intercontinental Exchange, Inc. (NYSE:ICE) scaled a new 52-week high of $64.17 in yesterday’s trading session. The upside was driven by the company’s solid May volumes as well as efforts to ramp up its index services. About 3.7 million shares exchanged hands in the last trading session and the stock finally closed at $63.79, up 0.27%. Year to date, the stock has returned 13.06%, which is substantially above 8.71% returned by the S&P 500.

Intercontinental Exchange has recently announced average daily volume for May that climbed 28% to 5.5 million contracts. Also, the securities exchange agreed to acquire Global Research division’s index platform from Bank of America Merrill Lynch (NYSE:BAC) in a bid to ramp up the index services. With this acquisition, the company will enjoy about $1 trillion in the AUM benchmarked combined fixed income index business.

Why the Stock Should Be in Your Portfolio

Intercontinental Exchange boasts an impressive inorganic story, comprising strategic buyouts of Standard & Poor’s Securities Evaluations, Inc., or SPSE, Credit Market Analysis Limited and NSX & Atrium among others. But the most significant is the acquisition of NYSE in Nov 2013. Several strategic acquisitions have not only expanded Intercontinental Exchange but also resulted in expense synergies.

The Zacks Rank #3 (Hold) company is well-positioned to continue to grow revenues banking on the strength of compelling product suit that includes a broad range of risk management services like trade execution, market data, pre- and post-trade processing and clearing services on an integrated platform.

Intercontinental Exchange has been deploying capital effectively in shareholder-friendly moves. The 18% dividend increase last quarter marks the third consecutive double-digit increase. The company also has $721 million remaining under its share repurchase program.

A healthy and minimal risk-based balance sheet will continue to provide stability and buoyancy to the company over medium to long term cushioning shareholders friendly moves. This in turn makes the stock an attractive pick for yields seeking investors.

Shares of Intercontinental Exchange surged 13.06% year to date outperforming the Zacks categorized Securities and Exchanges industry’s gain of 11.09%. Successful integration of acquisitions, timely achievement of cost synergies and strategic initiatives will push up its growth profile.

The expected long term earnings growth rate is currently pegged at 13.70, better than the industry average of 12.10. Also, the company’s price earnings growth ratio of 1.55 compares favorably with the industry average of 2.06.

Valuation is also attractive at present as the stock is currently trading at a P/B multiple of 2.4, a 4% discount to the industry average. Intercontinental Exchange has a trailing 12-month return on equity (ROE) of 10.7%, higher than the industry average of 9.5%.

Stocks to Consider

Better-ranked stocks from the finance sector are CBOE Holdings Inc. (NASDAQ:CBOE) , MarketAxess (NASDAQ:MKTX) and Total System Services (NYSE:TSS) .

CBOE Holdings is a leading derivative exchange in the U.S., offering trading in stock or equity options, index options, exchange traded-products (ETP) and so on. The company had an average positive surprise of 4.96% in the last four quarters. The stock sports Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MarketAxess is a leading multi-dealer trading platform, offering institutional investors access to global liquidity in products like U.S. high-grade corporate bonds, emerging markets and high-yield bonds, European bonds, U.S. agency bonds, credit derivatives and other fixed-income securities. The company had an average positive surprise of 7.26% in last four quarters. The stock carries a Zacks Rank #2 (Buy).

Total System is one of the world’s largest companies for outsourced payment services, offering a broad range of issuer- and acquirer-processing technologies. The company had an average positive surprise of 3.59% in the last four quarters. The stock carries Zacks Rank #2 (Buy).

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