![]() While rate hikes are generally bad for markets, the fixed-income segment usually emerges as a winner. It gives the company exposure to the vast fixed-income markets. In 2022 the segment made up about 29% of ICE's total revenues. ICE's fixed-income and data services are another critical segment of ICE's all-weather nature. Revenues and Operating Income in the Fixed Income Segment (Company Financials) Today, ICE has a strong presence ( around 95%, according to Benjamin Jackson, Q2'21) in the marketplace for market-based mechanisms to price carbon. Management anticipated the trend towards cleaner energy and made the necessary investments with the acquisition of the Climate Exchange back in 2010. This imbalance will cause a lot of uncertainty and volatility. According to Ben Jackson during the Q3'21 earnings call, energy consumption is expected to double over the next three decades, and carbon emissions are expected to be reduced by 50%. As the lead provider of services in the primary energy categories like oil, gas, LNG, and clean energy, ICE provides its customers with an essential service to manage its customer's exposure to the current price risks.Īnother current tailwind is the transition towards cleaner energy. The ongoing war in Ukraine has reshaped the global energy supply chain and created new risks for market participants. The company's mission is to provide each market participant with the proper risk management tools and price transparency to navigate the volatility in the energy market. The highly diversified nature of ICE's products puts the company in an excellent position to capture the current tailwinds in the energy market. Over time, management has built a highly diversified platform, capturing tailwinds in every economic environment with high operating margins and an increasing amount of recurring revenues. ![]() The segment has operating margins of approximately 70%, and about 34% of the segment's revenues are recurring. In 2022 revenues came in at around $4,071 billion, making up approximately 56% of ICE's total revenues. The exchanges segment generates revenues by offering a marketplace to trade various derivatives contracts and securities, offering data and connectivity services, and collecting listing fees. Over 70% of the S&P 500 and 77% of the Dow Jones are listed on the NYSE, which makes it a critical part of the global financial markets. The most prestigious venue under the ICE umbrella is the New York Stock Exchange. ICE operates regulated exchanges on a global scale. ![]() Revenues and Operating Income in the Exchanges Segment (Company Financials) To achieve this goal, management follows a specific strategy diversification across various asset classes and continuously increasing the amount of recurring revenues.īased on the assumptions made in my analysis, ICE's stock is fairly valued. Management's long-term goal is to make ICE an all-weather company that performs in all economic environments. Currently, management is focused on expanding its offering in the mortgage space with acquisitions like Simplifile in 2019, Ellie Mae in 2020, and the current pending acquisition of Black Knight ( BKI). Examples of this would be the International Petroleum Exchange in 2001, the New York Board of Trade in 2007, the Climate Exchange in 2010, Endex in 2013, and so on. Over the years, they have had the right insights to foresee trends and made the needed investments to profit from them. ICE's management has a fantastic track record of fueling growth by acquiring other companies. The company can spread its fixed costs over more transactions as the platform grows and transaction volume increases. The economies of scale are the last piece of the puzzle for this great business. The platform profits from network effects as each additional buyer or seller increase the platform's value to all participants. As a global marketplace, ICE operates a two sided-platform matching buyers and sellers. Not only has the company very attractive financials, but it also operates in an industry surrounded by high barriers to entry. Its financials are excellent around 50% operating margins, adjusted EPS CAGR of approximately 16% from 2006 to 2022 (even during the financial crisis in 2008, the company has grown its EPS), attractive cash returns, and 50% recurring revenues. Intercontinental Exchange ( NYSE: ICE) is a wonderful company at a fair price.
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