Why Is CME (CME) Up 0.4% Since Last Earnings Report?
It has been about a month since the last earnings report for CME Group (CME). Shares have added about 0.4% 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 Q3 Earnings Beat Estimates, Revenues Rise Y/Y
CME Group reported third-quarter 2023 record adjusted earnings per share of $2.25, which beat the Zacks Consensus Estimate by 1.8%. The bottom line increased 13.6% year over year. The quarter reflects the ninth straight quarter of double-digit growth.
Quarterly results benefited from an increase in trading volumes. Average daily volume increased in two of its six asset classes.
Performance in Detail
CME Group’s revenues of $1.3 billion increased 9% year over year. The year-over-year increase was primarily due to higher clearing and transaction fees (up 8.7% year over year) and market data and information services (up 8.6% year over year). Revenues beat the Zacks Consensus Estimate by 0.01%.
Total expenses increased 5.8% year over year to $517.6 million, attributable to higher technology, compensation and benefits, amortization of purchased intangibles and other expenses. Our estimate was $549.5 million.
Operating income increased 11% from the prior-year quarter to $820.2 million and beat our estimate of $750.5 million.
Average daily volume (ADV) was 22.3 million contracts. Non-U.S. ADV reached 6.5 million contracts, up 7% year over year, including 16% growth in interest rates and double-digit growth across agricultural, energy and metals products.
Financial Update
As of Sep 30, 2023, CME Group had $2.4 billion of cash and marketable securities, down 14.1% from 2022 end. As of Sep 30, 2023, long-term debt was $3.4 billion, down 0.02% from 2022 end.
As of Sep 30, 2023, CME had total equity worth $28.2 billion, up 4.7% from 2022 end.
Capital Deployment
CME Group paid out $400 billion in dividends, taking the payout to $22 billion 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.
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 trending downward 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.
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CME Group Inc. (CME) : Free Stock Analysis Report
