Back to top

Analyst Blog

Following a display of dissatisfaction with the declining share price by shareholders in the company’s annual meeting, CME Group Inc. (CME - Analyst Report) announced a five-for-one stock split last Thursday, with the intention of boosting trading volume. In order to implement the stock split, the company will give a 400% stock dividend to its shareholders. The dividend will be paid on July 20, to shareholders of record as of July 10.

While a stock split will not directly impact share value, it will make shares more affordable. This in turn will likely boost demand, which will then drive the price upward. Affordable prices will also diversify the investor base of CME, which currently has mostly large institutional investors.

Investors’ concerns are justified, given the substantial decline in CME’s trading volume as well as share price. On Thursday, the company’s trading volume was 495,100, down 28% from 688,100 a year ago. Moreover, the share price also witnessed an 8.5% decline from May 24, 2011 to close at $256.16.

Management believes that CME’s recently acquired ‘systemically important’ designation is also partly responsible for the recent decline in share prices. Systemically important financial institutions are subject to higher scrutiny and regulation than others, which sparked unwarranted investor concerns that the company would have to raise fresh capital to fortify its business.

Last week, the Financial Stability Oversight Council assigned the systemically important status to CME’s clearing house – CME Inc. – as well as ICE Clear Credit, the clearing house owned by rival IntercontinentalExchange Inc. (ICE - Analyst Report).

The announcement of the stock split has boosted investors’ confidence in the stock, leading to a 1.1% increase in CME’s share price on Thursday to $256.16.

CME currently carries a Zacks #4 Rank, which implies a ‘Sell’ rating for the short term.

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
ERBA DIAGNO… ERB 3.80 +7.04%
TRAVELCENTE… TA 11.84 +6.38%
BANCO DO BR… BDORY 14.74 +5.66%
AIR INDUSTR… AIRI 9.99 +4.15%
EQT MIDSTRM… EQM 98.14 +3.38%