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Here's Why You Should Hold on to CME Group (CME) Stock Now

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CME Group Inc. (CME - Free Report) is poised for growth, given its efforts to expand the product portfolio, launch new product initiatives and grow its global footprint. This Zacks Rank #3 (Hold) exchange operator remains promising, banking on several growth prospects.

Growth Projections: The Zacks Consensus Estimate for 2017 earnings per share is pegged at $4.78 on revenues of $3.65 billion. While the top line improves 1.6% year over year, the bottom line rises 5.5%.

For 2018, the Zacks Consensus Estimate for earnings per share is $5.38 on revenues of $3.91billion, reflecting a year-over-year increase of 12.5% and 7%, respectively.

CME Group has expected long-term earnings per share growth of 10.2%.

Price Outperformance: Shares of CME Group have rallied 25.8% in a year, higher than the industry’s growth of 25.2%. The stock has also outperformed the S&P 500 index’s 18.5% gain during the period.



 

Estimate Revisions: Though the stock has seen the Zacks Consensus Estimate for current-year earnings being revised 0.4% downward, for 2018, the consensus mark moved north by same percentage over the last 30 days.

Positive Earnings Surprise History: CME Group has surpassed the Zacks Consensus Estimate in each of the last four quarters with an average beat of 2.60%.

Growth Drivers in Place

CME Group continuously dwells on strategic initiatives that will accelerate growth. In its latest endeavor, the company has announced launch of bitcoin futures in December to cater to the emerging demand of evolving cryptocurrency markets.

In a bid to focus on over-the-counter clearing services on interest rate swaps and foreign exchange, CME Group will exit its credit default swap clearing business by mid-2018. The transaction will free up $650 million as clearing member capital.

CME Group also announced to shut down its London-based derivatives exchange and clearing house, CME Europe and CME Clearing Europe that will result in annual savings between $10 million and $12 million. This move will primarily impact the company’s fortunes in 2018 as well as free up over $150 million capital.

CME Group’s top line demonstrates continuous improvement, banking on higher clearing and transaction fees besides access and communication fees. Average daily volume has also been increasing over the last several years. Given its sturdy market position with diverse derivative product lines and a vast global reach, we expect the momentum to continue.

Though the company has been witnessing expenses on the rise, the first three quarters of 2017 however, benefited from lower expenses. Management projects its adjusted total operating expenses guidance, excluding licensing fees, to be $1.08 billion. The figure is flat with the level in 2016.

A strong operational performance helps the company enjoy a healthy capital position. This in turn supports effective capital deployment including shareholder-friendly moves.

Stocks to Consider

Some better-ranked stocks from the finance sector are MGIC Investment Corporation (MTG - Free Report) , Infinity Property and Casualty Corporation and Torchmark Corporation .

MGIC Investment provides private mortgage insurance and ancillary services to lenders and government sponsored entities in the United States. The company delivered an average four-quarter positive surprise of 2.17%. The stock flaunts a Zacks Rank #1 (Strong Buy) .You can see the complete list of today’s Zacks #1 Rank stocks here.

Infinity Property and Casualty provides personal automobile insurance products in the United States. The company’s average four-quarter positive surprise is 300.65% and it sports a Zacks Rank of 1.

Torchmark provides various life and health insurance products, and annuities in the United States, Canada and New Zealand. The company pulled off an average four-quarter positive surprise of 2.17%. The stock carries a Zacks Rank #2 (Buy).

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