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Is ICE Group (ICE) Likely to Miss This Earnings Season?

Zacks Equity Research

Global exchange operator – IntercontinentalExchange Group Inc. (ICE) or ICE Group,is scheduled to release second-quarter 2014 financial results before the opening bell on Aug 7.

In the last reported quarter, the company posted break-even earnings, although the four-quarter trailing average beat is pegged at 3.0%. Let us see how things are shaping up for this announcement.

Factors at Play

Despite the initial public offering (IPO) of Euronext and divestment of some non-exchange businesses, ICE Group posed a sluggish fundamental growth outlook throughout the second quarter. While the ongoing business restructuring initiatives lacked momentum, the risks related to the integration and execution of the merged entity also continue to linger. Moreover, the company facesstiff competitionand challenging regulations, given its vast scale of operations.

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The unfavorable scenario was also evident from frayed volumes and faltering industry dynamics, including reduced volatility due to extreme market complacency. Average daily volumes fell 19% year over year in the first half of 2014, reflecting a decline of 26% in June, 15% in May and 13% in April.

The inability to deliver strong financial results and lack of synergies from operations could also weigh on the company’s financials. Such direct risks associated with business expansion along withhigher expenses will remain a cause of concern. Moreover, the absence of share buybacks restricts growth in earnings per share.

Earnings Whispers

Our proven model shows that ICE Group is not likely to beat earnings as it lacks the required combination of two key components.

Zacks ESP: ICE Group has a negative Zacks ESP. That is because Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate of $2.04 per share and the Zacks Consensus Estimate of $2.07, is -1.45%.

Zacks Rank: ICE Group has a Zacks Rank #5 (Strong Sell). We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) from going into an earnings announcement, especially when the company is witnessing negative estimate revisions momentum.

The combination of ICE Group’s Zacks Rank #5 and -1.45% ESP increases the possibility of an earnings miss this season.

Stocks to Consider

Here are some other financial companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Qiwi Plc (QIWI) has Earnings ESP of +4.76% and a Zacks Rank #1 (Strong Buy).

Essex Property Trust Inc. (ESS) has Earnings ESP of +18.24% and a Zacks Rank #3 (Hold).

Parkway Properties Inc. (PKY) has Earnings ESP of +6.06% and a Zacks Rank #3.

Read the Full Research Report on ICE
Read the Full Research Report on QIWI
Read the Full Research Report on PKY
Read the Full Research Report on ESS


Zacks Investment Research