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Cboe Global (CBOE) Q4 Earnings Miss, Revenues Beat Estimates

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Cboe Global Markets’ (CBOE - Free Report) fourth-quarter 2020 adjusted earnings of $1.21 per share missed the Zacks Consensus Estimate of $1.22. However, the bottom line remained flat year over year.

Shares of the company lost 2.7% in the pre-market trading session, reflecting the underperformance.

The quarter witnessed increase in revenues, which was offset by higher expenses.

Cboe Global Markets, Inc. Price, Consensus and EPS Surprise

Operational Details    

Total revenues came in at $307.1 million and beat the Zacks Consensus Estimate by 2%. The top line increased 10% year over year on increases in net transaction and clearing fees, access and capacity fees and market data fees. In addition to acquisitions completed in the first half of the year, fourth-quarter results include the acquisitions of EuroCCP and MATCHNow.

Options revenues increased 17% year over year to $162.5 million driven by higher net transaction and clearing fees and market data revenue. Average daily volume for Options surged 41% year over year while revenue per contract or RPC slipped 19% in the quarter.

Revenues of North American Equities decreased 3% year over year to $73.6 million, attributable to lower regulatory fines and assessments, coupled with lower market data revenues, offset somewhat by higher revenues from access and capacity fees and net transaction and clearing fees.

Futures revenues of $21.5 million were down 30% year over year due to a decline in net transaction fees.

European Equities revenues surged 64% year over year to $35.5 million, reflecting the addition of EuroCCP, as well as higher net transaction and clearing fees.

Global FX revenues increased 9% to $14 million driven by higher access and capacity fees.

Total adjusted operating expenses increased 17% year over year to $112.2 million attributable to acquisitions, resulting in higher compensation and benefits and technology support services.

Adjusted operating income increased 6% year over year to $194.9 million driven by higher revenues.

Adjusted operating margin in the quarter under review contracted 240 basis points (bps) to 63.5%.

Adjusted EBITDA margin of 66.9% contracted 330 bps.

Full-Year Highlights

Adjusted earnings were $5.27 per share, up 11.4% year over year but in line with the consensus estimate.

Operating revenues of $1.3 billion for 2020 increased 10.3% year over year and were in line with the consensus estimate.

Financial Update

As of Dec 31, 2020, CBOE Global had cash and cash equivalents of $245.4 million, up 7% from the figure at 2019 end. Total assets were $6.5 billion, up 27.4% from the level at 2019 end.

At the end of the quarter, long-term debt of the company was $1.1 billion, up 30.8% year over year.

Total shareholders’ equity was $3.3 billion at the end of the reported quarter, down 0.2% from the value on Dec 31, 2019.

Share Repurchase and Dividend Update

The company paid out cash dividends worth $170.6 million and bought back shares worth $349.1 million in 2020. It bought back another $0.5 million worth shares.

The company had $399.7 million remaining under its existing share repurchase authorization.

The board of directors authorized up to an additional $200 million for share repurchase program.

2021 Guidance

Recurring non-transactional revenues, defined as access and capacity fees plus proprietary market data, are expected to increase 7% to 8%, from a base of $342 million in 2020, with organic growth targeted in the range of 6% to 7%.

The company expects recently closed acquisitions to contribute net revenue growth in the range of 4 to 6 percentage points.

Adjusted operating expenses are now expected to be in the range of $531 to $539 million.

Capital expenditures are expected in the range of $60 to $65 million.

The effective tax rate on adjusted earnings is expected between 27.5% and 29.5%.

Zacks Rank

Cboe Global currently carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Securities and Exchanges

Fourth-quarter earnings of Nasdaq (NDAQ - Free Report) , Intercontinental Exchange (ICE - Free Report) and MarketAxess Holdings (MKTX - Free Report) beat the respective Zacks Consensus Estimate.

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