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Here's Why Should You Stay Invested in CME Group (CME) Stock

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·3 min read
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CME Group’s CME compelling derivative product lines, global presence, a growing proportion of volume from customers outside the United States, focus on over-the-counter clearing services, effective capital deployment and favorable growth estimates make it worth retaining in one’s portfolio.

CME Group has a decent surprise history, having surpassed earnings estimates in the last six quarters.

Zacks Rank and Price Movement

CME currently carries a Zacks Rank #3 (Hold). Shares of CME Group have lost 16.1% year to date compared with the industry’s decrease of 34.4%.

 

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Zacks Investment Research


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Optimistic Growth Projection

The Zacks Consensus Estimate for 2022 earnings is pegged at $7.87, indicating a year-over-year improvement of 18% on 7.1% higher revenues of $5 billion. The consensus estimate for 2023 earnings is pegged at $8.32, which indicates a year-over-year improvement of 5.7% on 5% higher revenues of $5.3 billion.

The expected long-term earnings growth rate is pegged at 6%.

Northbound Estimate Movement

The consensus estimate for 2022 and 2023 earnings has moved 1.3% and 0.1% north, respectively,  in the past 60 days, reflecting analysts’ optimism.

Business Tailwinds

CME Group’s compelling portfolio, driving higher clearing and transaction fees, as well as improving non-transactional revenues should continue to drive the top line. Increased adoption of a greater number of crypto assets with increased interest across the entire crypto-economy should add to the upside.

Increased volatility driving improved volumes should increase clearing and transaction fees for CME.

This largest futures exchange in the world, in terms of trading volume as well as notional value traded, boasts a solid market presence with a 90% market share of the global futures trading and clearing services. Increasing electronic trading volume adds scalability and hence leverage to CME Group’s operating model.

A solid balance of cash and marketable securities supports a strong capital position, lending financial flexibility. This in turn supports investments in several growth initiatives, including organic market data growth and new product extensions and offerings, thus accelerating growth.

Solid Dividend History

Banking on solid cash flow, CME Group has increased dividends at a five-year CAGR (2018-2022) of 8.7%. The dividend yield is 1.6%, better than the industry average of 1.1%, making the stock an attractive pick for yield-seeking investors.

Stocks to Consider

Some better-ranked stocks from the property and casualty insurance sector are RLI Corp. RLI, W.R. Berkley Corporation WRB and HCI Group, Inc. HCI, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

RLI has a solid track record of beating earnings estimates in each of the last seven quarters. In the past year, RLI stock has increased 12.1%.

The Zacks Consensus Estimate for RLI’s 2022 and 2023 earnings per share is pegged at $4.35 and $4.45, indicating year-over-year increases of 12.4% and 2.3%, respectively.

W.R. Berkley’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 27.08%. In the past year, W.R. Berkley's stock has increased 34.7%.

The Zacks Consensus Estimate for WRB’s 2022 and 2023 earnings has moved 4.9% and 4.1% north, respectively, in the past 30 days.

The Zacks Consensus Estimate for HCI Group’s 2022 and 2023 earnings has moved 33.3% and 40% north, respectively, in the past 30 days. In the past year, HCI Group stock has lost 15.7%.

The Zacks Consensus Estimate for 2022 and 2023 earnings per share indicates year-over-year increases of 280.9% and 75%, respectively.


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CME Group Inc. (CME) : Free Stock Analysis Report
 
RLI Corp. (RLI) : Free Stock Analysis Report
 
W.R. Berkley Corporation (WRB) : Free Stock Analysis Report
 
HCI Group, Inc. (HCI) : Free Stock Analysis Report
 
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