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Here's Why You Should Retain CME Group (CME) in Your Portfolio
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CME Group (CME - Free Report) is well-poised to gain from launch of products, strong market position, solid capital position and global distribution.
The company has a decent earnings surprise history. The company beat estimates in three of the last four quarters with the average surprise being 3.09%.
The Zacks Consensus Estimate for 2020 and 2021 earnings per share is pegged at $7.00 and $7.06, indicating year-over-year increase of nearly 2.9% and 0.8%, respectively. The expected long-term earnings growth rate is pegged at 4.3.
Why Should You Hold the Stock?
Despite the difficult circumstances the coronavirus pandemic has caused globally, CME Group continues to help clients in managing their risk and uncertainty. It continues to gain from highly diverse product set, global distribution and salesforce worldwide, which aids the company in creating capital and operational efficiencies for clients as the trading environment evolves.
CME Group continues to launch innovative products, tools and services to support customer needs and expand international presence. The introduction of Micro E-mini futures in May 2019 has been the most successful product launch in CME Group’s history. Over 330 million contracts have traded since launch with a record ADV of 1.9 million contracts in the second quarter of 2020. Both the Micro E-mini S&P 500 and Russell 2000 futures had record trading in June of 1.96 million and 280,000 contracts, respectively.
Also, E-mini Russell 2000 futures were the third-highest adopted new product by global institutional clients following WTI Crude Oil futures and WTI Crude Oil options.
Leveraging CME Group’s rapidly developed robust and liquid underlying Micro E-mini futures market, the options contracts will offer market participants greater flexibility amid continuing economic uncertainty.
Moreover, the top line of the company should benefit from higher clearing and transaction fees and market data and information services. Strong market position with diverse derivative product lines, additional market data distribution channels, increase in custody fees and global reach is likely to drive revenues in the days ahead. The Zacks Consensus Estimate for the company’s 2020 revenues is pegged at $5 billion, indicating an improvement of 3% from the year-ago reported figure.
Additionally, CME Group boasts a strong balance sheet with strong cash balance and access to $2.4 billion multi-currency revolving senior credit facility with various financial institutions, which matures in November 2022. Long-term debt decreased 8.1% from the 2019-end level at second-quarter end and exited the second quarter with total cash and cash equivalents of $1.5 billion. Total debt to total capital of 11.4% at second-quarter end remains lower than 12.5% at 2019-end.
Further, CME Group’s times interest earned, a measure to identify the company ability to service debt, of 18.9X is good when compared with the 2019-end figure of 16.1X, implying that its earnings are sufficient to cover interest obligations.
Based on operational excellence, this Zacks Rank #3 (Hold) futures exchange boasts a strong balance sheet and cash flows, which enable it to engage in capital deployment strategies. It has increased dividend at a six-year CAGR (2014-2020) of 10.4%. Its current dividend yield of 2% is higher than the industry average of 1.5%, which makes the stock an attractive pick for yield-seeking investors.
CME Group’s trailing 12-month return on assets of 2.6% is higher than the industry’s 2.4%. This highlights the company's efficient utilization of its assets to generate earnings.
However, shares of this largest futures exchange in the world in terms of trading volume as well as notional value traded have lost 15.9% on a year-to-date basis, against the industry’s increase of 0.5%. Nonetheless, the company’s policy to ramp up its growth profile and capital position should continue to drive shares higher.
Also, we remain concerned about the high expenses incurred due to higher compensation and benefits, technology expenses, depreciation and amortization expenses. Higher spending is estimated by the company in the next year.
Moody’s surpassed estimates in each of the last four quarters, with the average beat being 13.81%.
OTC Markets surpassed estimates in three of the last four quarters, with the average earnings beat being 10.54%.
MoneyGram surpassed estimates in two of the last four quarters, with the average earnings surprise being 14.77%.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
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Here's Why You Should Retain CME Group (CME) in Your Portfolio
CME Group (CME - Free Report) is well-poised to gain from launch of products, strong market position, solid capital position and global distribution.
The company has a decent earnings surprise history. The company beat estimates in three of the last four quarters with the average surprise being 3.09%.
The Zacks Consensus Estimate for 2020 and 2021 earnings per share is pegged at $7.00 and $7.06, indicating year-over-year increase of nearly 2.9% and 0.8%, respectively. The expected long-term earnings growth rate is pegged at 4.3.
Why Should You Hold the Stock?
Despite the difficult circumstances the coronavirus pandemic has caused globally, CME Group continues to help clients in managing their risk and uncertainty. It continues to gain from highly diverse product set, global distribution and salesforce worldwide, which aids the company in creating capital and operational efficiencies for clients as the trading environment evolves.
CME Group continues to launch innovative products, tools and services to support customer needs and expand international presence. The introduction of Micro E-mini futures in May 2019 has been the most successful product launch in CME Group’s history. Over 330 million contracts have traded since launch with a record ADV of 1.9 million contracts in the second quarter of 2020. Both the Micro E-mini S&P 500 and Russell 2000 futures had record trading in June of 1.96 million and 280,000 contracts, respectively.
Also, E-mini Russell 2000 futures were the third-highest adopted new product by global institutional clients following WTI Crude Oil futures and WTI Crude Oil options.
Leveraging CME Group’s rapidly developed robust and liquid underlying Micro E-mini futures market, the options contracts will offer market participants greater flexibility amid continuing economic uncertainty.
Moreover, the top line of the company should benefit from higher clearing and transaction fees and market data and information services. Strong market position with diverse derivative product lines, additional market data distribution channels, increase in custody fees and global reach is likely to drive revenues in the days ahead. The Zacks Consensus Estimate for the company’s 2020 revenues is pegged at $5 billion, indicating an improvement of 3% from the year-ago reported figure.
Additionally, CME Group boasts a strong balance sheet with strong cash balance and access to $2.4 billion multi-currency revolving senior credit facility with various financial institutions, which matures in November 2022. Long-term debt decreased 8.1% from the 2019-end level at second-quarter end and exited the second quarter with total cash and cash equivalents of $1.5 billion. Total debt to total capital of 11.4% at second-quarter end remains lower than 12.5% at 2019-end.
Further, CME Group’s times interest earned, a measure to identify the company ability to service debt, of 18.9X is good when compared with the 2019-end figure of 16.1X, implying that its earnings are sufficient to cover interest obligations.
Based on operational excellence, this Zacks Rank #3 (Hold) futures exchange boasts a strong balance sheet and cash flows, which enable it to engage in capital deployment strategies. It has increased dividend at a six-year CAGR (2014-2020) of 10.4%. Its current dividend yield of 2% is higher than the industry average of 1.5%, which makes the stock an attractive pick for yield-seeking investors.
CME Group’s trailing 12-month return on assets of 2.6% is higher than the industry’s 2.4%. This highlights the company's efficient utilization of its assets to generate earnings.
However, shares of this largest futures exchange in the world in terms of trading volume as well as notional value traded have lost 15.9% on a year-to-date basis, against the industry’s increase of 0.5%. Nonetheless, the company’s policy to ramp up its growth profile and capital position should continue to drive shares higher.
Also, we remain concerned about the high expenses incurred due to higher compensation and benefits, technology expenses, depreciation and amortization expenses. Higher spending is estimated by the company in the next year.
Stocks to Consider
Some better-ranked stocks from the finance sector include Moody’s Corporation (MCO - Free Report) , OTC Markets Group Inc. (OTCM - Free Report) and MoneyGram International Inc. each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Moody’s surpassed estimates in each of the last four quarters, with the average beat being 13.81%.
OTC Markets surpassed estimates in three of the last four quarters, with the average earnings beat being 10.54%.
MoneyGram surpassed estimates in two of the last four quarters, with the average earnings surprise being 14.77%.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>