Back to top

Image: Bigstock

CBOE Holdings (CBOE) Up 4.8% Since Earnings Report: Can It Continue?

Read MoreHide Full Article

It has been about a month since the last earnings report for CBOE Holdings, Inc. (CBOE - Free Report) . Shares have added about 4.8% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

CBOE Holdings Q1 Earnings Beat Estimates, Grow Y/Y

CBOE Holdings, Inc.’s first-quarter 2017 adjusted earnings of $0.78 per share beat the Zacks Consensus Estimate of $0.68 by 14.7%. Also, the bottom line jumped 27.9% year over year.

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

Adjusted net income allocated to common stockholders surged 44.7% year over year to $72.2 million.

On a GAAP basis, net income allocated to common stockholders was $15.1 million or 16 cents per share compared with $49.2 million or 60 cents per share in the prior-year quarter.

Notably, CBOE Holdings completed the acquisition of Bats Global Markets, Inc. on Feb 28, 2017. The company remains focused on utilizing opportunities to boost financial strength, accelerate strategic growth initiatives and access new areas of growth to deliver greater value to shareholders.

Operational Details

In the first quarter, total revenue came in at $356.2 million. The top line outpaced the Zacks Consensus Estimate of $202 million by 76.3% and also skyrocketed 108.9% year over year. On an adjusted basis, revenues soared 35.2%. Net revenue contribution of $39.2 million from Bats Global Markets for March as well as increase in transaction fees and other revenues drove the upside.

Total trading volume of CBOE Holdings rose 9% year over year to 7.1 million contracts. Total revenue per contract (RPC) for Options declined 8.7% year over year to 24.2 cents. Total RPC for U.S. Futures increased 10.4% year over year to $1.814.

Total operating expenses increased 163.1% year over year to $167.3 million, primarily due to higher professional fees and outside services, compensation and benefits, depreciation and amortization, technology support services and incremental operating expenses related to the buyout of Bats Global Markets in March. On an adjusted basis, expenses increased 25.4% from the prior-year quarter.

Adjusted operating margin expanded 10 basis points year over year to 59.9%.

Financial Update

As of Mar 31, 2017, CBOE Holdings had cash and cash equivalents of $153.3 million, down 57.6% from $97.3 million at the end of 2016. Total assets were $5.3 billion at the end of the first quarter as against $476.7 million at year-end 2016.

Total shareholders’ equity was $2.7 billion at the end of the reported quarter as against $317.9 million as of Dec 31, 2016.

Net operating cash flow came in at ($9.6) million in the first quarter, which compared unfavorably with $97.4 million in the year-ago quarter.

Dividend Update

In the first quarter, the board of directors declared a dividend of $0.25 per share, which amounted to $28 million.

2017 Outlook

The guidance for full-year 2017 takes into account the company’s acquisition of Bats Global Markets.

Adjusted operating expenses are expected in the range of $415–$423 million (down 1% to up 1% year over year) compared with $417 million in 2016.

Depreciation and amortization expenses (included in adjusted operating expenses) are projected in the range of $52–$54 million, excluding the amortization of acquired intangibles of $169 million. Capital expenditures are estimated in the range of $55–$60 million based on the company's ongoing investments in systems hardware and software, including CBOE Holdings' systems migration to Bats Global Markets’ technology.

Acquisition-related expenses are likely to be about $65.2 million, which represents expenses recognized through Mar 31, 2017. Accelerated stock-based compensation expenses are projected to be about $9.1 million in the year. The effective tax rate will likely be within 35–37%.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted by 10.15% due to these changes.

CBOE Holdings, Inc. Price and Consensus

 

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

VGM Scores

At this time, CBOE Holdings' stock has a poor score of 'F' on both growth and momentum front. The stock was allocated a grade of 'F' on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.


See More Zacks Research for These Tickers


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


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

Published in