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Why Is CME (CME) Down 7.2% Since Last Earnings Report?

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A month has gone by since the last earnings report for CME Group (CME - Free Report) . Shares have lost about 7.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is CME due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

CME Group Q2 Earnings Beat, Revenues Decrease Y/Y

CME Group Inc. reported second-quarter 2021 adjusted earnings per share of $1.64, which beat the Zacks Consensus Estimate of $1.59. The bottom line increased 0.6% year over year due to higher market data and information services and lower expenses. Average daily volume increased in four of the six products lines.

Performance in Detail

CME Group’s revenues of $1.2 billion decreased 0.3% year over year. The year-over-year decrease was primarily due to lower clearing and transaction fees (down 1.1% year over year) and other (down 3.1%). Increase in market data and information services (up 7.8% year over year) limited the downside. The top line beat the Zacks Consensus Estimate by 0.8%.

Total expenses decreased 7.4% year over year to $504.5 million during the reported quarter, attributable to lower compensation and benefits, professional fees and outside services and amortization of purchased intangibles. Operating income increased 5.8% from the prior-year quarter to $674.7 million.

Average daily volume improved 5% to 18.4 million driven by double-digit, year-over-year increases in Interest Rates, Agricultural and Options markets. Average rate per contract decreased 4.9%.

Financial Update

As of Jun 30, 2021, CME Group had $1.2 billion of cash and marketable securities, down 31.3% from 2020 end. As of Jun 30, 2021, long-term debt of $3.4 billion remained flat with 2020 end. As of Jun 30, 2021, the company had total equity worth $26.8 billion, up 1.7% from 2020 end.

Capital Deployment

The company paid out dividends of $322 million in the second quarter. CME Group has returned more than $15.9 billion to shareholders in the form of dividends since the implementation of the variable dividend policy in early 2012.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, CME has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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 indicates a downward shift. Notably, CME has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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