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Cboe Global (CBOE) Q4 Earnings Miss Estimates, Issues View

Zacks Equity Research

Cboe Global Markets, Inc.’s CBOE fourth-quarter 2017 adjusted earnings of 87 cents per share missed the Zacks Consensus Estimate of 88 cents by 1.14%. However, the bottom line improved 12% year over year on the back of higher revenues, partially offset by increased expenses. The metric also benefited from the enactment of Tax Reform.

CBOE Holdings, Inc. Price, Consensus and EPS Surprise


CBOE Holdings, Inc. Price, Consensus and EPS Surprise | CBOE Holdings, Inc. Quote


The company further recorded expanded trading volume in the reported quarter.

Operational Details

Total revenues came in at $266 million, which missed the Zacks Consensus Estimate by 0.94%. The top line however, surged 86% year over year on contribution from Bats buyouts and higher net transaction fees.

Average daily volume for Options was 7.029 million, up nearly 9% year over year while that of Futures was 0.3 million, up nearly 20.8% year over year.

Total revenues per contract for Options rose 2% year over year to 23.9 cents. Total RPC for U.S. Futures increased 6.9% year over year to $1.799.

Total operating expenses inched up 0.4% year over year to $105 million on higher compensation and benefits expense. Adjusted operating margin expanded 260 basis points year over year to 60.5%.

Full-Year Highlights

Cboe Global Markets posted adjusted earnings of $3.57 per share on revenues of $995.6 million. While the top line improved 12%, the bottom line surged 57% over 2016.

2017 marks the record-setting year for trading in VIX Futures, VIX Options and SPX Options Volume.

The company realized cost synergies of about $25 million due to Bats acquisition.

Cboe Global Markets lowered debts by $400 million.

Financial Update

As of Dec 31, 2017, CBOE Holdings had cash and cash equivalents of $143.5 million, up 47.5% from $97.3 million at the end of 2016. Total assets were $5.3 billion at 2017-end compared with $476.7 million at year-end 2016.

Total shareholders’ equity was $3.1 billion at 2017-end compared with $317.9 million as of Dec 31, 2016.

Dividend Update

The company paid cash dividends worth $30.6 million or 27 cents per share in the quarter.

2018 Outlook

Adjusted operating expenses are predicted between $420 million and $428 million, an increase of 1-3% over 2017.

Depreciation and amortization expenses (included in adjusted operating expenses) are projected in the range of $53-$58 million excluding the amortization of acquired intangibles of $157 million.

Capital expenditures are estimated in the band of $50-$55 million.

The effective tax rate is anticipated within 26.5-28.5%.    

Zacks Rank

Cboe Global Markets carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Players

Among other players from the securities and exchange industry that have reported fourth-quarter earnings, the bottom line of CME Group Inc. CME, MarketAxess Holdings Inc. MKTX and Intercontinental Exchange, Inc. ICE beat the respective Zacks Consensus Estimate.

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