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Why Hold is a Prudent Approach for CME Group (CME) Stock Now

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CME Group’s (CME - Free Report) compelling product portfolio, global presence, focus on over-the-counter clearing services, effective capital deployment and favorable growth estimates make it worth retaining in one’s portfolio.

CME Group has a decent surprise history, having surpassed earnings estimates in the last six quarters.

Zacks Rank and Price Movement

CME currently carries a Zacks Rank #3 (Hold). Shares of CME Group have lost 8.8% year to date compared with the industry’s decrease of 33.6%.

 

Zacks Investment Research
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Optimistic Growth Projection

The Zacks Consensus Estimate for 2022 earnings is pegged at $7.91, indicating a year-over-year improvement of 18.6% on 7.3% higher revenues of $5 billion. The consensus estimate for 2023 earnings is pegged at $8.38, which indicates a year-over-year improvement of about 6% on 5% higher revenues of $5.3 billion.

The expected long-term earnings growth rate is pegged at 6.1%.

Northbound Estimate Movement

The consensus estimate for 2022 and 2023 earnings has moved 0.5% and 0.7% north, respectively, in the past 30 days, reflecting analysts’ optimism.

Business Tailwinds

CME Group’s top line should continue to benefit from a compelling portfolio. Increased volatility driving improved volumes should fuel clearing and transaction fees. Increased adoption of a greater number of crypto assets with increased interest across the entire crypto-economy should add to the upside. CME also stays focused on improving non-transactional revenues.

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.

CME Group’s solid balance leads to adequate financial flexibility. This in turn supports investments in several growth initiatives, including organic market data growth and new product extensions and offerings, driving growth as well as effective capital deployment.

Solid Dividend History

Banking on solid cash flow, CME Group has increased dividends at a five-year CAGR (2018-2022) of 8.7%. The dividend yield is 1.6%, better than the industry average of 1.1%, making the stock an attractive pick for yield-seeking investors.

Stocks to Consider

Some better-ranked stocks from the finance sector are Brighthouse Financial, Inc. (BHF - Free Report) , HCI Group, Inc. (HCI - Free Report) and American Financial Group, Inc. (AFG - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Brighthouse Financial’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 55.91%. In the past year, BHF's stock has lost 7.4%.

The Zacks Consensus Estimate for BHF’s 2022 and 2023 earnings has moved 4.3% and 0.6% north, respectively, in the past 30 days.

The Zacks Consensus Estimate for HCI Group’s 2022 and 2023 earnings has moved 33.3% and 40% north, respectively, in the past 60 days. In the past year, HCI Group’s stock has lost 35.6%.

The Zacks Consensus Estimate for HCI’s 2022 and 2023 earnings per share indicates a year-over-year increase of 280.9% and 75%, respectively.

American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 41.72%. In the past year, American Financial has gained 7.5%.

The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 9.8% and 6.9% north, respectively, in the past 30 days.