Here's Why You Should Stay Invested in CME Group (CME)
CME Group CME is well poised to grow, banking on the strength of its global presence, a compelling product portfolio, a focus on over-the-counter clearing services and a solid capital position. These coupled with optimistic growth projections and upward estimate revisions make the stock worth retaining in one’s portfolio.
Shares of this Zacks Rank #3 (Hold) company have gained 4.4% year to date, outperforming the industry’s increase of 4%.
This largest futures exchange in the world in terms of trading volume as well as notional value traded has a solid history of delivering earnings surprises in the last 13 reported quarters. Its earnings grew 8.7% in the last five years.
The Zacks Consensus Estimate for 2024 and 2025 has moved 1.6% and 2.1%, respectively, in the past 30 days, reflecting analyst optimism.
Image Source: Zacks Investment Research
Growth Drivers
CME Group’s strength lies in its organic growth. Increasing clearing and transaction fees continue to drive the top line. We estimate the 2026 top line to record a three-year CAGR of 4.7%.
Clearing and transaction fees, which contribute the lion’s share, continue to benefit from increased volatility that aids trading volumes. We estimate clearing and transaction fees to increase at a three-year CAGR (2023-2026) of 4.2%.
Volumes are poised to benefit. CME has a 90% market share of global futures trading and clearing services. It is witnessing growth in electronic trading volume and higher adoption of crypto assets with increased interest across the entire crypto economy. CME’s investments are showing desirable results.
The company is focusing on improving margins through cost management. It expects its core expense to be $1.585 billion in 2024.
CME Group has been accelerating organic market data growth, expanding its product breadth and engaging in capital deployment by virtue of its solid capital position.
CME Group has been enhancing shareholders' value by increasing payouts. It hiked dividends at a five-year CAGR (2019-2023) of 8%. Its dividend yield is 2.2%, better than the industry average of 1.6%, making the stock an attractive pick for yield-seeking investors.
Also, CME Group pays five dividends per year, with the fifth being variable and based on excess cash flow in a year.
Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.
The Zacks Consensus Estimate for CME Group’s 2024 earnings is pegged at $9.60, indicating an increase of 2.8% on 5.2% higher revenues of $5.9 billion. The consensus estimate for 2025 earnings is pegged at $9.76, indicating an increase of 1.6% on 3.9% higher revenues of $6.1 billion. The long-term earnings growth rate is currently pegged at 6.6%. We estimate the bottom line to increase at a three-year (2023-2026) CAGR of 2.9%.
Stocks to Consider
Some top-ranked stocks from the finance sector are Cboe Global Markets CBOE, Coinbase Global COIN and AssetMark Financial AMK, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Cboe Global’s 2024 and 2025 earnings per share indicates a year-over-year increase of 6.4% and 6.3%, respectively. Year to date, CBOE has gained 6.5%. The expected long-term earnings growth rate is 13.6%, better than the industry average of 8.9%.
Coinbase has a solid track record of beating earnings estimates in the last four quarters. COIN stock has climbed 24.6% year to date. The Zacks Consensus Estimate for COIN’s 2024 earnings per share indicates a year-over-year increase of 173%.
AssetMark Financial delivered a trailing four-quarter average earnings surprise of 0.81%. Year to date, the stock has risen 19.8%. The Zacks Consensus Estimate for AMK’s 2024 and 2025 earnings suggests a year-over-year rise of 13.5% and 5.55%, respectively.
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
Cboe Global Markets, Inc. (CBOE) : Free Stock Analysis Report
AssetMark Financial Holdings, Inc. (AMK) : Free Stock Analysis Report
Coinbase Global, Inc. (COIN) : Free Stock Analysis Report
