The Zacks Analyst Blog Highlights: Intercontinental Exchange, Fortegra Financial, Brown & Brown, Arthur J. Gallagher and Tiptree Financial

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Aug 22, 2014, 10:31 ET

CHICAGO, Ill., Aug. 22, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Intercontinental Exchange Inc. (NYSE:ICE-Free Report), Fortegra Financial Corporation (NYSE:FRF-Free Report), Brown & Brown Inc. (NYSE:BRO-Free Report), Arthur J. Gallagher & Co. (NYSE:AJG-Free Report) and Tiptree Financial Inc. (Nasdaq:TIPT-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Thursday's Analyst Blog:

ICE Group Down to Strong Sell on Persistent Low Volumes

On Aug 21, 2014, Zacks Investment Research downgraded Intercontinental Exchange Inc. (NYSE:ICE-Free Report), or ICE Group, by a notch to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

ICE Group has been witnessing downward estimate revisions since the company's second-quarter 2014 results and a continued sluggish growth outlook, despite the recent renovation in operations. Additionally, this global exchange operator underperformed the one-year S&P 500 index, which recorded growth of 12.7% against a negative return of 5.1% clocked by the company.

On Aug 7, ICE Group reported second-quarter 2014 operating earnings per share (EPS) of $2.10, which exceeded the Zacks Consensus Estimate by 4% but lagged the year-ago quarter figure by 4.1%.

Average daily volumes of total futures and options persistently fell 20% until July this year, reflecting weakness in average rate per contract as well. Moreover, higher expenses that spiked 188% year-over-year more than offset top-line growth of 102%.

Consequently, operating margin deteriorated to 43.6% from 60.5% in the year-ago quarter. The absence of share buybacks throughout 2013 and the first half of 2014 also limited EPS growth, although some repurchase activity was undertaken last month.

ICE Group's business consolidation is also incurring higher operating and capital expenses, the immediate effect of which is being witnessed in the deteriorating margins. Alongside, though the company has reduced a chunk of its debt from 2013-end, debt leverage still remains at cautious level.

ICE Group also faces major headwinds from intense competition, weak industry dynamics, challenging regulations and declining volatility that hurt derivative performance. These factors also making investors jittery about desirable growth in the near-term.

Meanwhile, the Zacks Consensus Estimate for 2014 and 2015 declined 2.4% and 4.5% to $9.00 and $11.22 a share, respectively, in the last 30 days. No upward estimate revision was witnessed for both these years.

Fortegra Financial a Strong Buy on Upwardly Revised Estimates

On Aug 21, 2014, Zacks Investment Research upgraded Fortegra Financial Corporation (NYSE:FRF-Free Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Fortegra Financial has been witnessing rising earnings estimates on the back of strong second-quarter 2014 earnings which surpassed the Zacks Consensus Estimate by 33%. This led to a bullish sentiment on the stock, and in turn an 8.8% increase in the 2014 Zacks Consensus Estimate to 74 cents per share over the last 30 days.

Fortegra Financial reported second quarter financial results on Aug 11. The top line, apart from beating the Zacks Consensus Estimate, improved 5.2% year over year largely on the back of organic growth in total revenue, decline in member benefit claims, and net losses and loss adjustment expenses.

Strong focus on revenue improvement and expense management reinstated faith in the stock. Moreover, cost containment initiatives helped the company to improve its earnings before interest, taxes, depreciation and amortization (EBITDA) margins without having to compromise on the quality of services offered. Impressive performance in the first half of the year also prompted Fortegra Financial to reiterate its 2014 revenue growth outlook at 7–9% and the adjusted EBITDA margin outlook at 32–34%. At second-quarter end, Fortegra Financial's cash position remained strong, which should help in consolidating its inorganic growth going forward.

Since the company posted strong second-quarter earnings, it has been trading at a 52-week high of $9.88. In fact, shares of the company soared 40.5% since it reported earnings, to close at $9.86 in the last trading session. Moreover, the one-year return from the stock is 26.57%, higher than the S&P 500's return of 19.96% and that of other players in the multi-line insurance space like Brown & Brown Inc. (NYSE:BRO-Free Report) and Arthur J. Gallagher & Co. (NYSE:AJG-Free Report), which generated returns of -1.36% and 7.94% respectively.

Notably, last week, Tiptree Financial Inc. (Nasdaq:TIPT-Free Report) agreed to acquire Fortegra Financial for $218 million. The deal is awaiting regulatory approval.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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