What happened
The share price of Intercontinental Exchange (ICE 0.16%) took off in November, gaining 13.3% for the month, according to S&P Global Market Intelligence. The stock is down about 21% year to date as of Dec. 5, trading at roughly $107 per share.
Overall, the major indexes were up in November, with the Dow Jones Industrial Average rising 5.7% and the S&P 500 gaining 5.4%.
So what
Intercontinental Exchange is a company that owns exchanges around the world, including the New York Stock Exchange. The company had a few catalysts driving it higher in November.
It got a bump early in the month upon the release of its third-quarter earnings, as it beat both revenue and earnings projections for the quarter. The company posted $1.8 billion in revenue, up 1% year over year, while adjusted diluted earnings per share was $1.31, which was up from $1.26 a year ago this quarter. Intercontinental Exchange also boosted its operating margin by 164 basis points year over year to 50%.
The exchange business, which accounts for the bulk of the revenue, was up 4% year over year, but Intercontinental Exchange also got a nice boost from its fixed income and data services arm, which saw revenue increase 12% compared to the third quarter of 2021. These segments offset losses in the mortgage technology business.
In addition, the inflation report for October came out last month and showed that inflation has cooled, with the year-over-year increase dropping compared to the previous month. Then, last week, Fed Chair Jerome Powell indicated that the Fed would slow the pace of interest rate hikes, potentially as soon as December, with inflation coming down. This was welcome news for the entire market, especially ICE, as the stock jumped more than 4% on the Nov. 30 news.
Economic news that boosts the stock markets and creates more trading volume is good news for Intercontinental Exchange, as the owner of stock exchanges.
Now what
The big news on the horizon for Intercontinental Exchange is its planned acquisition of Black Knight, a company that provides technology, data, and analytics to mortgage lenders and servicers. The business complements ICE's growing mortgage technology business. The deal should help streamline and automate the mortgage lending process for borrowers and lenders, thus lowering the costs of obtaining a mortgage.
The deal is expected to close in the first half of 2023.
Intercontinental Exchange was upgraded to a buy in November by Bank of America analyst Craig Siegenthaler, who sees improved long-term earnings quality from the Black Knight deal. He raised the price target to $132 per share.
Until then, it's a good company and dominant player in its industry. It may go where the markets go in the near term, but it is a solid long-term option.
