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CBOE Holdings (CBOE) Q3 Earnings Beat, Outlook Revised
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CBOE Holdings Inc. (CBOE - Free Report) reported third-quarter 2016 operating earnings of 58 cents per share, which surpassed the Zacks Consensus Estimate by a cent. However, the bottom line decreased 24% year over year due to lower transaction fees. Trading volumes too declined in the quarter under review.
Including one-time items, net income declined 7% year over year to 50 cents per share.
Operational Details
Total operating revenue fell 16% year over year to $156.2 million, primarily due to 22.7% lower transaction fees. Nonetheless, a 15.5% increase in market data fees limited the downside. In the reported quarter, exchange services and other fees inched up 5.5% to $11.5 million. Access fees were almost flat, while other revenues decreased 14.3%. However, revenues missed the Zacks Consensus Estimate of $158 million.
Total trading volume of CBOE Holdings declined 12% year over year to 4.63 million contracts per day. Average daily trading volume in high-margin index options and futures contracts plunged 19%, while multiply-listed options declined 6% year over year.
Revenue per contract (RPC) climbed 10.1% to 37.8 cents compared with 43.1 cents in the prior-year quarter. The decline stemmed from a shift in the mix of products traded with a lower proportion of volume coming from index options and futures contracts that generate the highest RPC.
Total operating expenses increased 5% year over year to $90.6 million, primarily due to higher professional fees and outside services, partially offset by lower depreciation and amortization and royalty fees. Total adjusted operating expenses declined 5% to $81.4 million. The company’s core operating expenses were up 1% to $51.6 million due to higher travel and promotional expenses as well as facilities cost. Volume-based expenses, including royalty fees and order routing fees, decreased 11% to $19.9 million on higher trading volume in licensed index and futures products.
Operating margin contracted 620 basis points year over year to 47.9%.
Financial Update
As of Sep 30, 2016, CBOE Holdings had cash and cash equivalents of $72.6 million, down 29% from $102.3 million at the end of 2015. Total assets came in at $441.3 million at the end of Sep 2016, up 14.7% from $384.8 million at year-end 2015.
Long-term liabilities rose to $58.1 million from $51.1 million at year-end 2015. Total shareholders’ equity was $289.6 million at the end of the third quarter as against $259.6 million as of Dec 31, 2015.
Net operating cash flow decreased 10% year over year to $174.1 million in the first nine months of 2016.
Dividend and Share Repurchase Update
The board of directors declared a dividend of 25 cents per share for the fourth quarter of 2016. The dividend will be paid on Dec 16, to shareholders on record as of Dec 2, 2016.
CBOE Holdings did not buy back any shares during the third quarter. However, the company spent $60.5 million to repurchase 0.9 million shares year to date. The company had shares worth about $97 million remaining under its authorization as of Sep 30, 2016.
2016 Outlook
Core operating expenses are expected to be a little below $211–$215 million. Depreciation and amortization expenses are projected to be slightly below $46–48 million. Capital expenditures are estimated to be marginally above $47–$49 million.
Nonetheless, the company reaffirmed its continuing stock-based compensation expense (included in core expenses) expectation of $13.5 million. Additionally, accelerated stock-based compensation expenses, recognized on a quarterly basis, are projected at $1 million for 2016. The effective tax rate will likely be within 38.5–39.5%.
Zacks Rank
CBOE Holdings presently carries a Zacks Rank #4 (Sell).
Among the securities exchanges, earnings of CME Group Inc. (CME - Free Report) and MarketAxess Holdings Inc.'s (MKTX - Free Report) beat Zacks Consensus Estimate while the bottom line of Nasdaq, Inc. (NDAQ - Free Report) met expectations in the third quarter.
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CBOE Holdings (CBOE) Q3 Earnings Beat, Outlook Revised
CBOE Holdings Inc. (CBOE - Free Report) reported third-quarter 2016 operating earnings of 58 cents per share, which surpassed the Zacks Consensus Estimate by a cent. However, the bottom line decreased 24% year over year due to lower transaction fees. Trading volumes too declined in the quarter under review.
Including one-time items, net income declined 7% year over year to 50 cents per share.
Operational Details
Total operating revenue fell 16% year over year to $156.2 million, primarily due to 22.7% lower transaction fees. Nonetheless, a 15.5% increase in market data fees limited the downside. In the reported quarter, exchange services and other fees inched up 5.5% to $11.5 million. Access fees were almost flat, while other revenues decreased 14.3%. However, revenues missed the Zacks Consensus Estimate of $158 million.
Total trading volume of CBOE Holdings declined 12% year over year to 4.63 million contracts per day. Average daily trading volume in high-margin index options and futures contracts plunged 19%, while multiply-listed options declined 6% year over year.
Revenue per contract (RPC) climbed 10.1% to 37.8 cents compared with 43.1 cents in the prior-year quarter. The decline stemmed from a shift in the mix of products traded with a lower proportion of volume coming from index options and futures contracts that generate the highest RPC.
Total operating expenses increased 5% year over year to $90.6 million, primarily due to higher professional fees and outside services, partially offset by lower depreciation and amortization and royalty fees. Total adjusted operating expenses declined 5% to $81.4 million. The company’s core operating expenses were up 1% to $51.6 million due to higher travel and promotional expenses as well as facilities cost. Volume-based expenses, including royalty fees and order routing fees, decreased 11% to $19.9 million on higher trading volume in licensed index and futures products.
Operating margin contracted 620 basis points year over year to 47.9%.
Financial Update
As of Sep 30, 2016, CBOE Holdings had cash and cash equivalents of $72.6 million, down 29% from $102.3 million at the end of 2015. Total assets came in at $441.3 million at the end of Sep 2016, up 14.7% from $384.8 million at year-end 2015.
Long-term liabilities rose to $58.1 million from $51.1 million at year-end 2015. Total shareholders’ equity was $289.6 million at the end of the third quarter as against $259.6 million as of Dec 31, 2015.
Net operating cash flow decreased 10% year over year to $174.1 million in the first nine months of 2016.
Dividend and Share Repurchase Update
The board of directors declared a dividend of 25 cents per share for the fourth quarter of 2016. The dividend will be paid on Dec 16, to shareholders on record as of Dec 2, 2016.
CBOE Holdings did not buy back any shares during the third quarter. However, the company spent $60.5 million to repurchase 0.9 million shares year to date. The company had shares worth about $97 million remaining under its authorization as of Sep 30, 2016.
2016 Outlook
Core operating expenses are expected to be a little below $211–$215 million. Depreciation and amortization expenses are projected to be slightly below $46–48 million. Capital expenditures are estimated to be marginally above $47–$49 million.
Nonetheless, the company reaffirmed its continuing stock-based compensation expense (included in core expenses) expectation of $13.5 million. Additionally, accelerated stock-based compensation expenses, recognized on a quarterly basis, are projected at $1 million for 2016. The effective tax rate will likely be within 38.5–39.5%.
Zacks Rank
CBOE Holdings presently carries a Zacks Rank #4 (Sell).
CBOE HOLDINGS Price, Consensus and EPS Surprise
CBOE HOLDINGS Price, Consensus and EPS Surprise | CBOE HOLDINGS Quote
Performance of Other Stocks
Among the securities exchanges, earnings of CME Group Inc. (CME - Free Report) and MarketAxess Holdings Inc.'s (MKTX - Free Report) beat Zacks Consensus Estimate while the bottom line of Nasdaq, Inc. (NDAQ - Free Report) met expectations in the third quarter.
You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>