A month has gone by since the last earnings report for CME Group (CME). Shares have added about 1.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CME due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
CME Group's Q1 Earnings Top Estimates, Revenues Up Y/Y
CME Group reported first-quarter 2020 adjusted earnings per share of $2.33, which surpassed the Zacks Consensus Estimate by 4.5%. The bottom line also improved 43.8% year over year, primarily due to higher revenues.
Performance in Detail
CME Group’s revenues of $1.5 billion increased 29% year over year courtesy of strong clearing and transaction fees. Moreover, the top line beat the Zacks Consensus Estimate by 1.4%. The year-over-year improvement in revenues can be attributed to higher clearing and transaction fees, which improved 34.2% year over year.
Total expenses increased 2.5% year over year to $562.2 million during the reported quarter on account of higher professional fees and outside services; depreciation and amortization; licensing and other fee agreements plus other expenses.
Operating income improved 52.1% from the prior-year quarter to $959.9 million.
Average daily volume surged 45% year over year to 27 million contracts in the quarter.
As of Mar 31, 2020, CME Group had $851.7 million of cash and cash equivalents, down 45.1% from the level at 2019 end. As of Mar 31, 2020, long-term debt of $3.5 billion slipped 5.4% from the figure at 2019 end.
The company exited the first quarter with total assets worth $137.9 billion, up 83.4% from the number at 2019 end.
CME Group announced dividends of $1.2 billion for the first quarter including the annual variable dividend worth $894 million. The company returned $13.5 billion to its shareholders via since the implementation of the variable dividend policy in early 2012.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
Currently, CME has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, CME has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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