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CME Group (CME) Q1 Earnings Beat, Revenues Lag Estimates

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CME Group Inc. (CME - Free Report) reported first-quarter 2018 adjusted earnings per share of $1.86, beating the Zacks Consensus Estimate of $1.85 by 0.5%. Moreover, the bottom line soared 52.5% year over year.

CME Group Inc. Price, Consensus and EPS Surprise

 

CME Group Inc. Price, Consensus and EPS Surprise | CME Group Inc. Quote

 

The year-over-year improvement was mainly owing to higher trading volumes as well as revenues. Also, options business remained sturdy in the quarter.

Notably, the company achieved a record high of average quarterly daily volume in five of its six product lines along with a record high in total options and electronic options.

Net income came in at $1.76 per share, which surged 49.2% year over year. The company’s focus on expense efficiency contributed to this upside.

Performance in Detail

CME Group’s revenues of $1.11 billion improved 19.3% year over year. However, the top line missed the Zacks Consensus Estimate of $1.12 billion by 1.2%. Increase in revenues can be attributable to higher clearing and transaction fees (up 22.9% year over year) as well as access and communication fees (up nearly 7% from the year-ago quarter). Also, broad-based strength across all of the company’s asset classes aided this improvement.

Total expenses increased 12.1% year over year to $368.1 million during the reported quarter, attributable to higher compensation and benefits, technology support services, professional fees and outside services, licensing and other fee agreements and other.

Operating income improved 23.3% to $740.9 million from the prior-year quarter.

Average daily volume (ADV) increased nearly 30% year over year to an all-time high of 22.2 million contracts, backed by higher volumes across all the six product lines. Average rate per contract rose in only two of the six product lines.

Financial Update

As of Mar 31, 2018, CME Group had $875 million of cash and marketable securities, which plunged 56.1% from the tally at 2017 end. As of Mar 31, 2018, long-term debt of $2.2 billion remained flat with the level at year-end 2017.

As of Mar 31, 2018, the company had total assets worth $69.9 billion, down 7.7% from $75.8 billion at year-end 2017.

Dividend Update

During the reported quarter, the company paid dividends worth $1.4 billion comprising the annual variable dividend of $1.2 billion and the regular first-quarter dividend of $238 million.

Zacks Rank

CME Group holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Companies in Securities Exchange Industry

The bottom line of Nasdaq, Inc. (NDAQ - Free Report) and MarketAxess Holdings Inc. (MKTX - Free Report) beat the respective Zacks Consensus Estimate in the quarter under review.

Intercontinental Exchange, Inc. (ICE - Free Report) will report first-quarter results on May 5 before the market opens. The Zacks Consensus Estimate for earnings is pegged at 88 cents, up 18.9% year over year.

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