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Why Is CBOE (CBOE) Up 10% Since Last Earnings Report?
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It has been about a month since the last earnings report for CBOE Global (CBOE - Free Report) . Shares have added about 10% 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 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 drivers.
Cboe Global Q4 Earnings Miss, Revenues Beat Estimates
Cboe Global Markets’ 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.
The quarter witnessed increase in revenues, which was offset by higher expenses.
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%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 5.7% due to these changes.
VGM Scores
At this time, CBOE has a strong 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 trending upward for the stock, and the magnitude of these revisions looks promising. Notably, CBOE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is CBOE (CBOE) Up 10% Since Last Earnings Report?
It has been about a month since the last earnings report for CBOE Global (CBOE - Free Report) . Shares have added about 10% 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 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 drivers.
Cboe Global Q4 Earnings Miss, Revenues Beat Estimates
Cboe Global Markets’ 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.
The quarter witnessed increase in revenues, which was offset by higher expenses.
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%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 5.7% due to these changes.
VGM Scores
At this time, CBOE has a strong 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 trending upward for the stock, and the magnitude of these revisions looks promising. Notably, CBOE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.