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CME Group (CME) Rallies 24% YTD: More Room for Upside Left?

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Shares of CME Group (CME - Free Report) have rallied 23.7% year to date, outperforming the industry’s increase of 22.4% and the Finance sector’s increase of 17.2%. The S&P 500 composite index has risen 22.6% in the said time frame. With a market capitalization of $80.9 billion, the average volume of shares traded in the last three months was 1.3 million.
 

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Compelling derivative product lines, global presence, a growing proportion of volume from customers outside the United States, focus on over-the-counter clearing services and effective capital deployment continue to drive CME Group, which beat earnings estimates in the last four quarters.

Can CME Stock Retain the Momentum?

The Zacks Consensus Estimate for 2022 earnings indicates a year-over-year improvement of 9.3% on 4.4% higher revenues. The expected long-term earnings growth rate is pegged at 5.8%. The consensus estimate has moved nearly 1% north in the past seven days, reflecting analysts’ optimism.

A compelling portfolio driving higher clearing and transaction fees, market data and information services and other revenues should continue to fuel the top line at this Zacks Rank #3 (Hold) company that increased at a six-year CAGR of nearly 8%. Non-transaction related opportunities, over-the-counter offerings and options business should continue to support growth.

This largest futures exchange in the world in terms of trading volume as well as notional value traded boasts a solid market presence with a 90% market share of the global futures trading and clearing services.  Increasing electronic trading volume adds scalability and hence leverage to CME Group’s operating model.

A solid liquidity position should continue to support investments in several areas, including organic market data growth and new product extensions and offerings.

CME Group is poised to benefit from increased adoption of a greater number of crypto assets with increased interest across the entire crypto-economy. The launch of Micro Ether futures (MET) earlier this month marked the second micro cryptocurrency product in 2021.

Banking on solid cash flow, CME Group has increased dividends at a five-year CAGR (2017-2021) of 12.5%. The dividend yield is 1.7%, better than the industry average of 0.9%, making the stock an attractive pick for yield-seeking investors.

Stocks to Consider

Some top-ranked stocks include OTC Markets Group (OTCM - Free Report) , Cboe Global Markets (CBOE - Free Report) and Intercontinental Exchange (ICE - Free Report) , each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for OTC Markets Group’s 2022 earnings has moved up 6.9% in the past 30 days. The expected long-term earnings growth rate is pegged at 9%.

The Zacks Consensus Estimate for Cboe Global’s 2022 earnings indicates a 2.5% year-over-year increase on 3.8% higher revenues. It has an impressive Growth Score of A.

The Zacks Consensus Estimate for Intercontinental’s 2022 earnings has moved up 0.7% in the past seven days and implies a 9.9% year-over-year increase. The expected long-term earnings growth rate is pegged at 10.3%, better than the industry average of 9.5%.

Shares of OTC Markets, Cboe Global and Intercontinental have gained 69.3%, 35.2% and 16.3%, respectively, year to date.