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Cboe Global Markets (CBOE) Up 15.8% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Cboe Global Markets (CBOE - Free Report) . Shares have added about 15.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cboe Global Markets due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cboe Global Markets' third-quarter 2020 adjusted earnings of $1.11 per share beat the Zacks Consensus Estimate by 3.7%.
However, the bottom line decreased 14% year. Sustained robust engagement among retail customers was offset by decreased trading among institutional investors as a result of ongoing uncertainty regarding the global macro-environment.
Operational Details
Total revenues came in at $292 million and beat the Zacks Consensus Estimate by 2.4%. However, the top line decreased 1% year over year on lower net transaction and clearing fees due to dec;line in trading volumes in index options and futures, offset by revenues from acquisitions.
Options revenues increased 1% year over year to $148.1 million driven by higher market data revenues. Average daily volume for Options surged 24% year over year while revenue per contract or RPC slipped 26.7% in the third quarter.
Revenues of North American Equities increased 1% year over year to $75.8 million, driven by higher revenues from access and capacity fees and net transaction fees.
Futures revenues of $23.3 million were down 39% year over year due to a decline in net transaction fees.
European Equities revenues surged 53% year over year to $31.6 million, reflecting the addition of EuroCCP, as well as higher access and capacity fees.
Global FX revenues increased 1% to $13.2 million driven by higher access and capacity fees.
Total adjusted operating expenses increased 13% year over year to $108.9 million attributable to acquisitions, resulting in higher compensation and benefits and technology support services.
Adjusted operating income dropped 7% year over year to $183.1 million. The decline was attributable to lower net revenues and higher operating expenses.
Adjusted operating margin in the quarter under review contracted 450 basis points (bps) to 62.7%.
Adjusted EBITDA margin of 65.9% contracted 500 bps.
Financial Update
As of Sep 30, 2020, CBOE Global had cash and cash equivalents of $212.7 million, down 7.2% from the figure at 2019 end. Total assets were $6.1 billion in the third quarter, up 18.8% from the level at 2019 end.
At the end of the third quarter, long-term debt of the company stands at $869.1 million, up 0.2% year over year.
Total shareholders’ equity was $3.3 billion at the end of the reported quarter, down 0.3% from the value on Dec 31, 2019.
Share Repurchase and Dividend Update
The company paid out cash dividends worth $45.8 million or 42 cents per share and bought back shares worth $41.8 million in the third quarter and another $32.2 million through Oct 29.
As of Oct 29, 2020, the company had $255.9 million remaining under its existing share repurchase authorization.
2020 Guidance Slashed
Adjusted operating expenses are now expected to be in the range of $415 to $420 million, down from the previous guidance of $436 to $444 million, primarily due to lower compensation costs, including incentive-based compensation, professional fees and travel and marketing expenses.
Capital expenditures are expected in the range of $45 to $50 million, down from the prior guidance of $65 to $70 million. Depreciation and amortization expense are estimated in the range of $32 to $36 million, down from the previous guidance of $34 to $38 million.
The effective tax rate on adjusted earnings is expected between 27% and 29%, up from the prior range of 26.5% to 28.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Cboe Global Markets has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Cboe Global Markets has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Cboe Global Markets (CBOE) Up 15.8% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Cboe Global Markets (CBOE - Free Report) . Shares have added about 15.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cboe Global Markets due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cboe Global's Q3 Earnings Top, Expense View Slashed
Cboe Global Markets' third-quarter 2020 adjusted earnings of $1.11 per share beat the Zacks Consensus Estimate by 3.7%.
However, the bottom line decreased 14% year. Sustained robust engagement among retail customers was offset by decreased trading among institutional investors as a result of ongoing uncertainty regarding the global macro-environment.
Operational Details
Total revenues came in at $292 million and beat the Zacks Consensus Estimate by 2.4%. However, the top line decreased 1% year over year on lower net transaction and clearing fees due to dec;line in trading volumes in index options and futures, offset by revenues from acquisitions.
Options revenues increased 1% year over year to $148.1 million driven by higher market data revenues. Average daily volume for Options surged 24% year over year while revenue per contract or RPC slipped 26.7% in the third quarter.
Revenues of North American Equities increased 1% year over year to $75.8 million, driven by higher revenues from access and capacity fees and net transaction fees.
Futures revenues of $23.3 million were down 39% year over year due to a decline in net transaction fees.
European Equities revenues surged 53% year over year to $31.6 million, reflecting the addition of EuroCCP, as well as higher access and capacity fees.
Global FX revenues increased 1% to $13.2 million driven by higher access and capacity fees.
Total adjusted operating expenses increased 13% year over year to $108.9 million attributable to acquisitions, resulting in higher compensation and benefits and technology support services.
Adjusted operating income dropped 7% year over year to $183.1 million. The decline was attributable to lower net revenues and higher operating expenses.
Adjusted operating margin in the quarter under review contracted 450 basis points (bps) to 62.7%.
Adjusted EBITDA margin of 65.9% contracted 500 bps.
Financial Update
As of Sep 30, 2020, CBOE Global had cash and cash equivalents of $212.7 million, down 7.2% from the figure at 2019 end. Total assets were $6.1 billion in the third quarter, up 18.8% from the level at 2019 end.
At the end of the third quarter, long-term debt of the company stands at $869.1 million, up 0.2% year over year.
Total shareholders’ equity was $3.3 billion at the end of the reported quarter, down 0.3% from the value on Dec 31, 2019.
Share Repurchase and Dividend Update
The company paid out cash dividends worth $45.8 million or 42 cents per share and bought back shares worth $41.8 million in the third quarter and another $32.2 million through Oct 29.
As of Oct 29, 2020, the company had $255.9 million remaining under its existing share repurchase authorization.
2020 Guidance Slashed
Adjusted operating expenses are now expected to be in the range of $415 to $420 million, down from the previous guidance of $436 to $444 million, primarily due to lower compensation costs, including incentive-based compensation, professional fees and travel and marketing expenses.
Capital expenditures are expected in the range of $45 to $50 million, down from the prior guidance of $65 to $70 million. Depreciation and amortization expense are estimated in the range of $32 to $36 million, down from the previous guidance of $34 to $38 million.
The effective tax rate on adjusted earnings is expected between 27% and 29%, up from the prior range of 26.5% to 28.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Cboe Global Markets has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Cboe Global Markets has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.