Analyst Note| Michael Miller |
Wide-moat Intercontinental Exchange reported a decent second quarter with EPS of $1.16 matching the FactSet consensus estimate. Adjusting for the acquisition of Ellie Mae, net revenue increased 5% year over year and decreased nearly 5% sequentially. However, in our view the sequential decline in revenue undersells ICE’s underlying performance as stronger recurring revenue was offset by weaker transactional revenue at the company’s exchanges and mortgage technology segments. ICE benefited from elevated levels of equity volatility and mortgage refinance activity in the last quarter, and as conditions normalized it acted as a headwind. We do not expect this to be a sustained trend and ICE’s businesses remain healthy. We are maintaining our $120 fair value estimate for ICE.