CME Group (CME) Poised For Earnings Growth: Time To Buy?

By Zacks Investment ResearchStock MarketsAug 09, 2016 09:58PM ET

www.investing.com/analysis/cme-group-(cme)-poised-for-earnings-growth:-time-to-buy-200147185

CME Group (CME) Poised For Earnings Growth: Time To Buy?

By Zacks Investment Research | Aug 09, 2016 09:58PM ET

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On Aug 9, 2016, Zacks Investment Research upgraded CME Group Inc. (NASDAQ:CME) to Zacks Rank #2 (Buy).

Why the Upgrade?

CME Group has been witnessing a rise in earnings estimates on the back of strong second-quarter 2016 results. This securities exchange reported earnings of $1.14 that surpassed the Zacks Consensus Estimate by 2.7%. Earnings improved 15.2% year over year on record average daily volumes.

In the second quarter, the company witnessed a rise in contract volumes across geographies. In Europe, volumes in five of the company’s product areas surged more than 20%, with the strongest growth in energy and equities. In Asia, energy and metal volumes soared more than 140% and 80%, respectively. Latin America also demonstrated growth on the back of higher energy volumes.

CME Group witnessed solid revenue growth as well as cost-control induced margin expansion and earnings improvement in the second quarter. Four out of the company’s six product lines registered more than 20% year-over-year increase in volume and transaction fee revenues. CME Group reported revenue growth of 11% in the second quarter.

Additionally, its open interest reached an all-time high of more than 116 million contracts. This reflects an increased reliance of market participants on CME Group.

During the second quarter, CME Group became the first exchange to offer swaptions clearing that will enable clients to obtain the greater operational and capital efficiencies from clearing. This is expected to help the company develop more specialized products going forward. Recently, the company also progressed with its initiatives to enhance Live Cattle futures markets with feedback from the cattle industry.

The Zacks Consensus Estimate for 2016 moved up 2.8% to $4.47 per share as 88% of the estimates were revised higher over the last 30 days. For 2017, 88% estimates were revised higher over the same time frame, which raised the Zacks Consensus Estimate by 2.8% to $4.82 per share.

CME Group is well positioned for growth supported by its diverse derivative product lines. Also, the launch of products and effective capital deployment strengthen the company. In addition, its increasing global presence and meaningful acquisitions raise optimism. The long-term earnings growth is pegged at 9.7%.

CME GROUP INC Price and Consensus

CME GROUP INC Price and Consensus | CME GROUP INC Quote

Stocks to Consider

Investors interested in the finance sector can look for MarketAxess Holdings Inc. (NASDAQ:MKTX) , Allied World Assurance Company Holdings, AG (NYSE:AWH) and Argo Group International Holdings, Ltd. (NASDAQ:AGII) . All these stocks sport a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7Best Stocks for the Next 30 Days. Click to get this free report >>

ARGO GROUP INTL (AGII): Free Stock Analysis Report

ALLIED WORLD AS (AWH): Free Stock Analysis Report

CME GROUP INC (CME): Free Stock Analysis Report

MARKETAXESS HLD (MKTX): Free Stock Analysis Report

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CME Group (CME) Poised For Earnings Growth: Time To Buy?

CME GROUP INC Price and Consensus

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