Back to top

Image: Bigstock

CBOE Holdings (CBOE) Beats on Q4 Earnings and Revenues

Read MoreHide Full Article

CBOE Holdings, Inc. (CBOE - Free Report) reported fourth-quarter 2016 adjusted earnings of 63 cents per share, beating the Zacks Consensus Estimate of 60 cents. Also, the bottom line increased 7% year over year.

Results were driven by higher revenues, partially offset by increased expenses. The quarter recorded increased trading volume.

Adjusted net income allocated to common stockholders climbed 5% year over year to $51.5 million.
 

On a GAAP basis, net income allocated to common stockholders was $44.7 million or 55 cents per share, compared with $50.2 million or 61 cents per share in the prior-year quarter.

For 2016, adjusted net income allocated to common stockholders came in at $197.3 million or $2.42 per share, as against $198.9 million or $2.40 per share in 2015. The Zacks Consensus Estimate for 2016 was $2.39.

Edward T. Tilly, CBOE Holdings' Chief Executive Officer, stated, "The fourth quarter capped off another year of solid financial results for CBOE Holdings, highlighted by record trading in our SPX options and VIX futures.  In addition, we are closer to completing our pending acquisition of Bats Global Markets , which we now expect to close by the end of the first quarter, pending the receipt of certain regulatory approvals and the satisfaction or waiver of customary closing conditions.”

Operational Details

Operating revenue of $645.1 million in 2016 surpassed the Zacks Consensus Estimate of $642.4 million. Also, revenues increased 2% year over year.

For fourth-quarter 2016, total operating revenue came in at $163.2 million, outpacing the Zacks Consensus Estimate of $160.5 million. Further, revenue was up 5% year over year. On an adjusted basis, it increased 6%. The increases were primarily driven by higher transaction fees as well as market data fees.

Total trading volume of CBOE Holdings climbed 13% year over year to 305.8 million contracts. Average revenue per contract (RPC) declined 8% year over year to 37.7 cents. The decline was mainly due to higher volume discounts and incentives.

Total operating expenses increased 10% year over year to $88.1 million, primarily due to higher professional fees and outside services, royalty fees and compensation and benefits. The increase was partially offset by reduced depreciation and amortization. On adjusted basis, expenses increased 4% from the prior-year quarter.

Adjusted operating margin expanded 90 basis points year over year to 46%.

Financial Update

As of Dec 31, 2016, CBOE Holdings had cash and cash equivalents of $97.3 million, down from $102.3 million at the end of 2015. Total assets came in at $477.2 million at the end of Dec 2016, up from $384.8 million at year-end 2015.

Long-term liabilities rose to $61.2 million from $51.1 million at year-end 2015. Total shareholders’ equity was $317.9 million at the end of the reported quarter as against $259.6 million as of Dec 31, 2015.

Net operating cash flow dipped 6% year over year to $229.6 million in 2016.

Share Repurchase Update

CBOE Holdings did not buy back any shares during the reported quarter due to its proposed transaction with Bats Global. However, during 2016, the company repurchased 947,786 shares of its common stock at an average price of $63.83 per share.

2017 Outlook

Core operating expenses are expected in the range of $214–$218 million, reflecting an increase of 3–5% compared with 2016.

Depreciation and amortization expenses are projected in the range of $40–42 million. Capital expenditures are estimated in the range of $46–$48 million, reflecting the company's ongoing investments in systems hardware and software, in a bid to support and enhance its trading technology.

Stock-based compensation expense (included in core expenses) is likely to be about $27.5 million. Accelerated stock-based compensation expenses are projected to be about $13 million in the year, of which about $12 million is expected to be recognized in first-quarter 2017. The effective tax rate will likely be within 38.5–39.5%.

Notably, the guidance does not consider the company's planned acquisition of Bats Global. It expects the acquisition to be accretive to adjusted diluted EPS in the first year, following the closure, and intends to update guidance for full-year 2017 post acquisition.  


Our Take

Results of CBOE Holdings reflect a decent performance. The company remains well poised for growth given its focus on expansion of its proprietary product offering, while extending its global customer reach. Diversified product portfolio and core competencies fuel its growth prospects. Additionally, the company is set to benefit from the Bats Global acquisition.

CBOE Holdings, Inc. Price, Consensus and EPS Surprise

CBOE Holdings, Inc. Price, Consensus and EPS Surprise | CBOE Holdings, Inc. Quote

CBOE Holdings presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Among others, CME Group Inc. (CME - Free Report) reported fourth-quarter 2016 adjusted earnings per share of $1.14, beating the Zacks Consensus Estimate of $1.10. The bottom line also improved 17.5% from the year-ago quarter.

Nasdaq, Inc. (NDAQ - Free Report) reported fourth-quarter 2016 adjusted earnings per share of 95 cents per share, beating the Zacks Consensus Estimate by a penny. Further, the bottom line improved 7% year over year.

Just Released – Driverless Cars: Your Roadmap to Mega-Profits Today

In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


CME Group Inc. (CME) - free report >>

Nasdaq, Inc. (NDAQ) - free report >>

Cboe Global Markets, Inc. (CBOE) - free report >>

Published in