Image source: Getty Images.

Intercontinental Exchange (NYSE:ICE), or ICE, has now delivered seven straight quarters of double-digit earnings growth. It's a streak investors hope the company can keep alive when it reports second-quarter results on Wednesday morning. Aside from that, there are a couple of other things investors should keep an eye on when reviewing the report.

First, let's review

Last quarter, ICE did not just keep its streak alive, it delivered its "best quarter in company history," according to CEO Jeffery Sprecher. Revenue was up 35.8% to $1.2 billion thanks to the contribution from the recent acquisitions of Interactive Data and Trayport, which more than doubled revenue in the company's data service segment. Earnings, meanwhile, jumped 20% to $3.68 per share driven by those two transactions as well as the company's ability to keep costs in check.

Did the company keep its costs in check?

One of the key drivers of ICE's earnings growth is its ability to wring out costs by quickly integrating acquisitions. For example, driving last quarter's strong showing was "strong expense management, including the acceleration of synergies," according to Sprecher. Needless to say, if the company's streak comes to an end, it will be because it wasn't able to capture synergies as quickly as anticipated. 

One way to measure this is to review the company's full-year cost projections versus its prior guidance. Last quarter, for example, the company lowered its full-year guidance for adjusted operating expenses from a range of $2 billion to $2.03 billion down to a new range of $1.97 billion to $2 billion. This was due in part to its projection to capture $85 million to $90 million in expense synergies this year. What investors should watch is whether cost guidance is heading higher because of lower-than-expected synergy capture, which would be a step in the wrong direction. 

Keep an eye on cash flow

By pushing costs down, ICE not only drives its earnings up, it also enables the company to produce a lot of cash flow. Last quarter, for example, the company generated $597 million in cash flow, which was up 28% year over year. Maintaining healthy cash flow is important for several reasons. 

First, ICE's debt ballooned to $6.8 billion, about double from a year ago, as a result of the acquisition of Interactive Data. That said, the company was comfortable with that elevated debt level because it believes it can reduce leverage rapidly via cash flow. Last quarter, it made real progress by paying off $500 million in debt.

That was impressive considering the company also returned nearly $100 million to shareholders via dividends after boosting the payout 14%. That said, the company did press pause on share repurchases, which resulted in a big reduction in overall shareholder distributions. For comparison sake, last year, the company returned nearly $1 billion in cash to investors via $660 million in share repurchases and $330 million in dividends. For stock buybacks to return, the company needs to continue generating robust cash flow to get its leverage down.

Finally, rising cash flow is critical because ICE continues to be on the hunt for acquisitions. Because of that, it needs to remain in a strong financial position to pounce on a compelling opportunity when it arises.

Investor takeaway

ICE has been on a roll thanks to its ability to make accretive acquisitions that it can quickly integrate into its network. Its most recent acquisition of Interactive Data puts it in the position to keep the streak alive, as long is it captured the expected cost synergies. Doing so would also drive cash flow growth, which is the key for rapid deleveraging of the balance sheet, boosting shareholder returns, and making additional accretive deals. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.