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Cboe Global (CBOE) Posts Weak March Volumes, Guides Q1 RPC

Zacks Equity Research

Cboe Global Markets, Inc. CBOE reported weak average daily volume (ADV) for March 2019. Total ADV of 7.3 million contracts declined 13.2% year over year due to the weak performance across the business lines — Options, Futures, U.S. Equities and European Equities.

Total contracts for the month were 154.1 million, having decreased nearly 13.2% year over year. Of this, Options contracts declined 13.3% to 148.7 million while Futures fell 9.7% to 5.3 million. Options ADV was 7.1 million whereas Futures ADV was 0.3 million.

Total volumes of U.S. Equities came in at 24.8 billion shares, down 20.4% year over year. European Equities reflected a 15% deterioration year over year to €191.5 billion whereas Global FX fell 3.4% to $809.5 billion.

Nonetheless, CBOE Global Markets has been witnessing solid average daily volumes over a considerable period of time, given its compelling product portfolio. This, in turn, has been driving transaction fees higher, which accounted for the lion’s share of the total operating revenues.

Concurrently, the company guided first-quarter average revenue per contract (RPC). It expects total RPC for Options to be 1-2% lower than 24.5 cents reported for the two-month period ending Feb 28, 2019. While RPC for index options is estimated to be 0.5-1% lower than 73.9 cents, the same for multiply-listed options is projected to be 4-5% lower than 7.3 cents. The company predicts RPC for Futures to be in line with $1.745.

The derivatives exchange in the United States has a strong market position and global reach with strength in its proprietary products, primarily SPX options, VIX options and VIX futures. In 2018, the company successfully migrated C2 options exchange and Cboe Futures Exchange to the Bats platform. Moreover, it has targeted Oct 7, 2019 for the migration of Cboe Options Exchange. This should in fact help the company retain its solid revenue growth momentum.

The company is also committed toward building a strategic economic market model via technological advancements. An upgrade of a wide array of products and services will assist all exchanges to stay afloat amid the changing industry dynamics.

Shares of CBOE Global Markets have outperformed the industry year to date. The stock has lost 2.2%, narrower than the industry’s decline of 2.6%.

Cboe Global is set to report first-quarter results on May 3. The Zacks Consensus Estimate for quarterly earnings is pegged at $1.10, indicating a year-over-year decrease of 20.3% on 8.7% lower revenues. Our proven model does not conclusively show that the company is likely to beat on earnings this time around. While its Zacks Rank #3 (Hold) increases the predictive power of ESP, Earnings ESP of -5.17% makes surprise prediction difficult. The company delivered positive surprise in the last four reported quarters.

Recently, securities exchanges, namely CME Group Inc. CME and MarketAxess Holdings Ltd. MKTX also reported their volumes. CME Group recorded an ADV of 19.1 million contracts per day, down 8.2% year over year while MarketAxess’ trading volume came in at $182.7 billion.

Stock to Consider

Investors interested in another stock from the finance sector might consider Cincinnati Financial Corporation CINF, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cincinnati Financial provides property and casualty insurance products in the United States. The company delivered positive surprises in three of the trailing four quarters, the average beat being 18.08%.

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