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CME Group's (CME) Q1 ADV Down Y/Y, March Volumes Disappoint,

Zacks Equity Research

CME Group Inc.’s CME first-quarter 2019 average daily volumes (“ADV”) declined 16% year over year to 18.6 million contracts per day on lower volumes across product lines.

Energy volume of 2.3 million contracts decreased 15%. Interest rate volume of 10.3 million contracts per day declined 14% while Equity index volume of 3.2 million contracts per day decreased 23%. Also, Metals volume of 0.6 million contracts per day declined 21% whereas Foreign exchange volumes contracted 20% to 0.9 million contracts per day. Agricultural volume of 1.4 million contracts per day witnessed a decline of 13% year over year.

CME Group is set to report first-quarter results on May 1. The Zacks Consensus Estimate for quarterly earnings is pegged at $1.63, indicating year-over-year decrease of 12.4%. 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, an Earnings ESP of -2.30% makes surprise prediction difficult. The company delivered positive surprise in the last four reported quarters.

In March, ADV declined 8% year over year as volumes declined across all the six product lines.

Nonetheless, CME group boasts 90% market share of the global futures trading and clearing services. Given its sturdy market position with diverse derivative product lines and global reach, ADV should get back to the growth path. Also, increasing electronic trading volume adds scalability and hence leverage to CME Group’s operating model.

Shares of CME Group have underperformed the industry year to date. While the stock has declined 10.7%, the industry has registered a 3.3% decrease.


Recently, MarketAxess Holdings Ltd. MKTX reported trading volume of $182.7 billion for March. Total volume included $96.8 billion in U.S. high-grade volume, $81.8 billion in other credit volume and $4.0 billion in liquid products volume.

Stocks to Consider

Some better-ranked stocks from the finance sector are Arch Capital Group Ltd. ACGL and Berkshire Hathaway Inc. BRK.B, both carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy)  stocks here.

Arch Capital Group provides property, casualty and mortgage insurance and reinsurance products worldwide. The company delivered positive surprise in all the last four reported quarters, with the average being 14.72%.

Berkshire Hathaway provides property and casualty insurance and reinsurance plus life, accident and health reinsurance besides operating railroad systems in North America. The company came up with positive surprise in three of the preceding four reported quarters, the average being 4.31%.

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