CME (CME) Up 4% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for CME Group (CME). Shares have added about 4% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
CME Group Q4 Earnings & Revenues Surpass Estimates
CME Group reported fourth-quarter 2023 record adjusted earnings per share of $2.37, which beat the Zacks Consensus Estimate by 4.4%. The bottom line increased 23.4% year over year.
Quarterly results benefited from an increase in trading volumes. Average daily volume increased in five of its six asset classes.
Performance in Detail
CME Group’s revenues of $1.4 billion increased 19.2% year over year. The year-over-year increase was primarily due to higher clearing and transaction fees (up 20.7% year over year), market data and information services (up 9.1% year over year) and other (up 19.7% year over year). Revenues beat the Zacks Consensus Estimate by 0.9%.
Total expenses increased 6.8% year over year to $576.1 million, attributable to higher compensation and benefits, technology, licensing and other fee agreements and other expenses. Our estimate was $479.7 million.
Operating income increased 29.2% from the prior-year quarter to $863.2 million but missed our estimate of $939.4 million.
Average daily volume (ADV) was 25.5 million contracts, which increased 17% year over year. Non-U.S. ADV reached 7.2 million contracts, up 28% year over year.
The total average rate per contract was 68.2 cents.
Full-Year Highlights
Adjusted earnings per share of $9.34 beat the Zacks Consensus Estimate of $9.24. The bottom line increased 17.1% year over year.
CME Group’s revenues of $5.6 billion increased 11.1% year over year. The top line was in line with the Zacks Consensus Estimate.
Financial Update
As of Dec 31, 2023, CME Group had $3 billion of cash and marketable securities, up 7.4% from 2022 end. As of Dec 31, 2023, long-term debt was $3.4 billion, which inched up 0.08% from 2022 end.
As of Dec 31, 2023, CME had shareholders' equity worth $26.7 billion, down 0.5% from 2022 end.
Capital Deployment
CME Group paid out $24.3 billion in dividends, since the implementation of the variable dividend policy in early 2012.
On Feb 8, 2024, CME Group raised its first-quarter dividend to $1.15 per share from the prior level of $1.10.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, 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 F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, CME has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
CME is part of the Zacks Securities and Exchanges industry. Over the past month, Nasdaq (NDAQ), a stock from the same industry, has gained 5.8%. The company reported its results for the quarter ended December 2023 more than a month ago.
Nasdaq reported revenues of $1.12 billion in the last reported quarter, representing a year-over-year change of +23.3%. EPS of $0.72 for the same period compares with $0.64 a year ago.
For the current quarter, Nasdaq is expected to post earnings of $0.64 per share, indicating a change of -7.3% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.2% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Nasdaq. Also, the stock has a VGM Score of D.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
CME Group Inc. (CME) : Free Stock Analysis Report
Nasdaq, Inc. (NDAQ) : Free Stock Analysis Report
