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Shares of CME Group (CME - Free Report) added .6% through late afternoon hours Wednesday, the last day of trading before it releases its Q2 earnings report. Investors displayed slight excitement ahead of the report, and this is certainly a stock to watch once the full results are in.
Signs of enthusiasm are understandable, as shares of CME have surged 16.1% year to date and 40.38% over the trailing year. Further, the company has delivered a positive earnings surprise in each of the last four quarters.
CME is the largest futures exchange in the world in terms of trading volume, and it has remained well-positioned for growth due to its strong market position and diverse derivative product lines. Moreover, the company has made continued efforts to expand and cross sell through strategic alliances, acquisitions and new product initiatives, like launching bitcoin futures—all of which have helped it outperform the Securities and Exchanges industry this year.
It will be interesting to see if CME can build on its momentum when it reports its second-quarter results on July 26 before the market opens. Let’s take a closer look for what investors should expect from CME’s latest report.
Latest Outlook & Valuation
According to our latest Zacks Consensus Estimates, CME is expected to report earnings of $1.72 per share and revenue of $1.05 billion. These results would represent year-over-year growth rates of 39.8% and 13.4%, respectively.
Expected top line growth can be traced back to higher fees concerning access, transaction and clearing. A key driver of revenue is also market data, which management expects growth of 5% - 6% over the next few years.
For the bottom line, the shutdown of the London-based derivatives exchange and clearing house will lead to annual savings of $10 - $12 million, primarily in 2018. In addition, the tax cut, which reduced CME’ tax rate to 21% from 35%, will help the bottom line by boosting margins.
Of course, top and bottom line growth aren’t the only things investors will be concerned with when CME reports its quarterly results. An important non-financial/operating metric to watch out for will be the average daily volume (ADV).
Notably, ADV increased nearly 30% year over year in the first quarter of 2018 to an all time high of 22.2 million contracts, backed by higher volumes along all six product lines.
The current consensus estimate is pegged at 18.3 million, slightly lower than the previous quarter’s record high. A positive surprise in this crucial metric could be momentous for the stock.
It should also be noted that the company is currently trading at a forward P/E of 24.78, which marks a slight premium to its industry’s average of 22.44.
Surprise Prediction
Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.
This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat.
CME does hold a Zacks Rank #3, which increases the predictive power of ESP. However, its ESP is currently at 0.00% because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at $1.72.
This makes it difficult to conclusively predict whether CME can produce an earnings beat for this quarter, but the company’s solid history of beating earnings makes it more likely that it can match those results.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Examining CME Group (CME) Stock Ahead of Earnings
Shares of CME Group (CME - Free Report) added .6% through late afternoon hours Wednesday, the last day of trading before it releases its Q2 earnings report. Investors displayed slight excitement ahead of the report, and this is certainly a stock to watch once the full results are in.
Signs of enthusiasm are understandable, as shares of CME have surged 16.1% year to date and 40.38% over the trailing year. Further, the company has delivered a positive earnings surprise in each of the last four quarters.
CME is the largest futures exchange in the world in terms of trading volume, and it has remained well-positioned for growth due to its strong market position and diverse derivative product lines. Moreover, the company has made continued efforts to expand and cross sell through strategic alliances, acquisitions and new product initiatives, like launching bitcoin futures—all of which have helped it outperform the Securities and Exchanges industry this year.
It will be interesting to see if CME can build on its momentum when it reports its second-quarter results on July 26 before the market opens. Let’s take a closer look for what investors should expect from CME’s latest report.
Latest Outlook & Valuation
According to our latest Zacks Consensus Estimates, CME is expected to report earnings of $1.72 per share and revenue of $1.05 billion. These results would represent year-over-year growth rates of 39.8% and 13.4%, respectively.
Expected top line growth can be traced back to higher fees concerning access, transaction and clearing. A key driver of revenue is also market data, which management expects growth of 5% - 6% over the next few years.
For the bottom line, the shutdown of the London-based derivatives exchange and clearing house will lead to annual savings of $10 - $12 million, primarily in 2018. In addition, the tax cut, which reduced CME’ tax rate to 21% from 35%, will help the bottom line by boosting margins.
Of course, top and bottom line growth aren’t the only things investors will be concerned with when CME reports its quarterly results. An important non-financial/operating metric to watch out for will be the average daily volume (ADV).
Notably, ADV increased nearly 30% year over year in the first quarter of 2018 to an all time high of 22.2 million contracts, backed by higher volumes along all six product lines.
The current consensus estimate is pegged at 18.3 million, slightly lower than the previous quarter’s record high. A positive surprise in this crucial metric could be momentous for the stock.
It should also be noted that the company is currently trading at a forward P/E of 24.78, which marks a slight premium to its industry’s average of 22.44.
Surprise Prediction
Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.
This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat.
CME does hold a Zacks Rank #3, which increases the predictive power of ESP. However, its ESP is currently at 0.00% because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at $1.72.
This makes it difficult to conclusively predict whether CME can produce an earnings beat for this quarter, but the company’s solid history of beating earnings makes it more likely that it can match those results.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>