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The Zacks Analyst Blog Highlights: CBOE Holdings, McGraw-Hill, Nasdaq OMX Group, NYSE Euronext and CVS Caremark

Zacks Equity Research

For Immediate Release

Chicago, IL – March 15, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include CBOE Holdings Inc. (CBOE), The McGraw-Hill Companies Inc. (MHP), Nasdaq OMX Group Inc. (NDAQ), NYSE Euronext Inc. (NYX) and CVS Caremark (CVS).

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Here are highlights from Thursday’s Analyst Blog:

CBOE, Dow Jones Extend Contract


CBOE Holdings Inc. (CBOE), the holding company for Chicago Board Options Exchange (CBOE) and S&P Dow Jones Indices, a subsidiary of The McGraw-Hill Companies Inc. (MHP), confirmed an extension of their licensing agreement.

Previously, the contract between CBOE and S&P Dow Jones was scheduled to expire in 2022. With the amendment, the agreement will now allow CBOE the exclusive rights to list security options, computed and published by S&P Dow Jones Indices through 2032 and the non-exclusive rights through 2033.

Following the amendment, CBOE can consistently trade in the exchange’s S&P 500 index options contract (:SPX). SPX is the most widely used U.S. index option with about 7 million contracts traded daily.  

CBOE’s association with S&P Dow Jones dates back to 1983 when S&P included CBOE in S&P 500 index options. This partnership initiated the trend of using index options to access the broader stock market through a single transaction. The alliance has benefited both the companies over the years by mutually complementing the other’s operations.

For 30 years, the partnership has enabled CBOE to use its Volatility Index (:VIX) complex, which uses S&P 500 options and also other S&P index options products for index calculation. This has constantly improved the financials of CBOE Holdings by contributing to its revenues. The extension of the contract is expected to further augment CBOE scores and facilitate its shareholders.

On the other hand through the liaison, CBOE allowed S&P Dow Jones to license third parties to use CBOE’s indexes, proprietary index methodologies, related marks and data. As per the agreement, CBOE also pays royalties on S&P 500 options and CBOE VIX options to S&P Dow Jones Indices. The contract extension is expected to bolster the revenue of S&P Dow Jones by allowing CBOE to list more options on the stock market indices using S&P index options products.  

Another exchange company, Nasdaq OMX Group Inc. (NDAQ) announced the merger of its Global Data Products and Global Index businesses to form a new reporting segment – Global Information Services in Jan 2013. The change will be implemented retrospectively from the beginning of the year.

CBOE currently carries a Zacks Rank #3 (Hold). Among others from the industry, NYSE Euronext Inc. (NYX) carries a favorable Zacks Rank #2 (Buy) and is worth noting.

CVS Caremark Touches New High

On Mar 13, 2013, shares of CVS Caremark (CVS) touched a new 52-week high of $52.93. The closing price of this integrated pharmacy service provider was $52.90, which represented a decent year-to-date return of 9.9%.

With a history of posting either in line or higher quarterly earnings, the stock presently carries a Zacks Rank #2 (Buy) and offers an attractive investment opportunity going forward.

Stock Drivers

The company’s bright prospects for 2013 on the heels of solid earnings forecast, stronger balance sheet, favorable selling season and positive industry dynamics are driving the stock.

CVS envisages adjusted earnings per share of $3.86 − $4.00 for 2013. The Zacks Consensus Estimate of $3.94 (reflecting a year-over-year growth of 14.45%) lies within the guidance range.

The company anticipates 2013 free cash flow and cash flow from operations to be in the range of $4.8 – $5.1 billion and $6.4 – $6.6 billion, respectively. The guidance includes the completion of the accelerated share repurchase agreement worth $4 billion. Strong cash flow enabled CVS to consistently return value to shareholders. Management plans to achieve a payout ratio of 25% by the end of 2013 (earlier target was 2015). Given this backdrop, the stock should appeal to income investors.

At the same time, CVS is highly optimistic about the 2013 selling season and shifted spotlight to 2014 selling season. Thus far, the company is perfectly on track to continue its growth momentum.  

On the domestic front, demographic trends, healthcare reforms in the U.S., and the generic wave in the pharmaceutical industry are expected to catalyze growth for the company. In the light of these trends, CVS expects accelerating adoption of its programs such as Maintenance Choice, Pharmacy Advisor and ExtraCare loyalty program, along with expansion of its MinuteClinics. 


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