Shares of Intercontinental Exchange (ICE 0.88%) rallied Thursday, up 4.5% as of 11:10 a.m. ET.
The company reported earnings today, showing off its resiliency with solid growth and an earnings beat. Intercontinental Exchange's business is composed of exchanges for commodity and financial derivative trading, a fixed-income clearing and data analytics platform, and a mortgage technology business.
As an exchange and technology provider, the company's business model is a nice mix of recurring subscriptions and trading activity, which can grow even in volatile market conditions. That's why 2024 marked the company's 19th straight year of growth.
NYSE: ICE
Key Data Points
A solid Q4 closes out another growth year
In the fourth quarter, Intercontinental Exchange grew revenue 5% to $2.32 billion, but displayed nice operating leverage, with adjusted non-GAAP (generally accepted accounting principles) earnings per share growing a faster 14% to $1.52. Both numbers beat analyst expectations.
The company's core Exchange revenue grew a healthy 9%, with energy and interest rate derivative trading leading the way, up 16% and 30%, respectively. Fixed income revenue was only up 3%, but within that, the "recurring" analytics subscriptions part of that business was up a higher 5%. Meanwhile, mortgage technology was up 1%, despite a slow housing market.
Looking ahead, Intercontinental Exchange didn't guide for full-year revenues, but did guide for only the "recurring" parts of its business. It predicts Exchange recurring revenue up low-single digits, Fixed Income and Data Services recurring revenue up mid-single digits, and Mortgage Technology recurring revenue up low-to-mid single digits for the year. Of course, Intercontinental Exchange also generates transaction revenue, which made up almost half of revenues last year.
Intercontinental looks fairly valued
While Intercontinental Exchange may look expensive on a GAAP basis at 40 times earnings, the company is also taking on a lot of amortization of intangible assets from prior acquisitions. Since that amortization isn't really an ongoing cash expense, this is a case where adjusted earnings may be more indicative of the company's true earnings power.
Intercontinental Exchange made $6.07 on an adjusted basis in 2024, up 8%. That brings the company's P/E ratio down to a more reasonable 27.8 times trailing earnings. Given its solid track record and growing dividend, this is a high-quality compounder at a reasonable price today.
