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CME Group (CME) Rises 20.6% YTD: Time to Buy the Stock?
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CME Group’s (CME - Free Report) shares have gained 20.6% year to date, outperforming the industry’s increase of 15.6%. The Finance sector increased 6.3% and the Zacks S&P 500 composite gained 18.6% in the same period. With a market capitalization of $72.9 billion, the average volume of shares traded in the last three months was 1.5 million.
Global presence, compelling product portfolio, focus on over-the-counter clearing services and solid capital position continue to drive this Zacks Rank #2 (Buy) company. The consensus estimate for 2023 and 2024 earnings has moved up 4 cents and 3 cents, respectively, in the past 30 days, implying analysts’ optimism.
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 11 reported quarters. Its earnings grew 8.2% in the last five years.
Image Source: Zacks Investment Research
Can It Retain the Momentum?
The Zacks Consensus Estimate for CME Group’s 2023 earnings is pegged at $9.04, indicating an increase of 13.4% on 8.7% higher revenues of $5.5 billion. The consensus estimate for 2024 earnings is pegged at $9.16, indicating an increase of 1.3% on 2.7% higher revenues of $5.6 billion.
The long-term earnings growth rate is currently pegged at 7.3%. We estimate the bottom line to increase at a three-year (2022-2025) CAGR of 4.2%.
Clearing and transaction fees, which contribute the lion’s share to the top line, should continue to benefit from increased trading volumes, which, in turn, benefit from heightened volatility. We estimate clearing and transaction fees to increase at a three-year CAGR (2022-2025) of 4.5%.
CME Group’s solid market presence, with a 90% market share of global futures trading and clearing services, increasing electronic trading volume and increased adoption of a greater number of crypto assets with increased interest across the entire crypto-economy should fuel volumes.
Higher non-transactional revenues should boost the top line as well. The top line has improved at a five-year CAGR of 6.6%. We estimate the bottom line to increase at a three-year (2022-2025) CAGR of 4.6%.
CME Group has a solid balance sheet and financial flexibility that support strategic growth initiatives, including organic market data growth, new product extensions and offerings as well as capital deployment.
Banking on operational excellence, CME Group has increased dividends at a five-year CAGR (2019-2023) of 8%. The 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 the year.
ICE has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 2.07%. In the past year, ICE has gained 16.5%.
The Zacks Consensus Estimate for ICE’s 2023 and 2024 earnings per share is pegged at $5.65 and $6.11, indicating a year-over-year increase of 6.6% and 8.3%, respectively.
Cincinnati Financial has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 25.25%. In the past year, CINF has gained 9.3%.
The Zacks Consensus Estimate for CINF’s 2023 and 2024 earnings per share is pegged at $5 and $5.88, indicating a year-over-year increase of 17.9% and 17.6%, respectively.
Kinsale Capital beat estimates in each of the last four quarters, the average being 14.88%. In the past year, KNSL has rallied 56.6%.
The Zacks Consensus Estimate for 2023 and 2024 has moved 0.2% and 0.07% north, respectively, in the past seven days, reflecting analysts’ optimism.
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CME Group (CME) Rises 20.6% YTD: Time to Buy the Stock?
CME Group’s (CME - Free Report) shares have gained 20.6% year to date, outperforming the industry’s increase of 15.6%. The Finance sector increased 6.3% and the Zacks S&P 500 composite gained 18.6% in the same period. With a market capitalization of $72.9 billion, the average volume of shares traded in the last three months was 1.5 million.
Global presence, compelling product portfolio, focus on over-the-counter clearing services and solid capital position continue to drive this Zacks Rank #2 (Buy) company. The consensus estimate for 2023 and 2024 earnings has moved up 4 cents and 3 cents, respectively, in the past 30 days, implying analysts’ optimism.
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 11 reported quarters. Its earnings grew 8.2% in the last five years.
Image Source: Zacks Investment Research
Can It Retain the Momentum?
The Zacks Consensus Estimate for CME Group’s 2023 earnings is pegged at $9.04, indicating an increase of 13.4% on 8.7% higher revenues of $5.5 billion. The consensus estimate for 2024 earnings is pegged at $9.16, indicating an increase of 1.3% on 2.7% higher revenues of $5.6 billion.
The long-term earnings growth rate is currently pegged at 7.3%. We estimate the bottom line to increase at a three-year (2022-2025) CAGR of 4.2%.
Clearing and transaction fees, which contribute the lion’s share to the top line, should continue to benefit from increased trading volumes, which, in turn, benefit from heightened volatility. We estimate clearing and transaction fees to increase at a three-year CAGR (2022-2025) of 4.5%.
CME Group’s solid market presence, with a 90% market share of global futures trading and clearing services, increasing electronic trading volume and increased adoption of a greater number of crypto assets with increased interest across the entire crypto-economy should fuel volumes.
Higher non-transactional revenues should boost the top line as well. The top line has improved at a five-year CAGR of 6.6%. We estimate the bottom line to increase at a three-year (2022-2025) CAGR of 4.6%.
CME Group has a solid balance sheet and financial flexibility that support strategic growth initiatives, including organic market data growth, new product extensions and offerings as well as capital deployment.
Banking on operational excellence, CME Group has increased dividends at a five-year CAGR (2019-2023) of 8%. The 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 the year.
Other Stocks to Consider
Some other top-ranked stocks from the finance sector are Intercontinental Exchange (ICE - Free Report) , Cincinnati Financial Corporation (CINF - Free Report) and Kinsale Capital Group, Inc. (KNSL - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ICE has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 2.07%. In the past year, ICE has gained 16.5%.
The Zacks Consensus Estimate for ICE’s 2023 and 2024 earnings per share is pegged at $5.65 and $6.11, indicating a year-over-year increase of 6.6% and 8.3%, respectively.
Cincinnati Financial has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 25.25%. In the past year, CINF has gained 9.3%.
The Zacks Consensus Estimate for CINF’s 2023 and 2024 earnings per share is pegged at $5 and $5.88, indicating a year-over-year increase of 17.9% and 17.6%, respectively.
Kinsale Capital beat estimates in each of the last four quarters, the average being 14.88%. In the past year, KNSL has rallied 56.6%.
The Zacks Consensus Estimate for 2023 and 2024 has moved 0.2% and 0.07% north, respectively, in the past seven days, reflecting analysts’ optimism.