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Here's Why You Should Consider Buying CME Group (CME) Stock
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CME Group’s (CME - Free Report) global presence, compelling product portfolio, focus on over-the-counter clearing services and solid capital position make it worth adding to one’s portfolio.
This largest futures exchange in the world in terms of trading volume as well as notional value traded has a solid history of delivering earnings surprises in the last 10 reported quarters. Its earnings grew 8.2% in the last five years.
CME Group’s return on equity for the trailing 12 months was 10.9%, better than the industry average of 10.8%.
Zacks Rank and Price Performance
CME Group carries a Zacks Rank #2 (Buy) currently. Shares have gained 8.9% year to date, outperforming the industry’s increase of 5.8%.
Northbound Estimate Revision
The consensus estimate for 2023 and 2024 earnings has moved up 0.6% and 0.1%, respectively, in the past 60 days, implying analysts’ optimism.
Growth Projection
The Zacks Consensus Estimate for 2023 earnings is pegged at $8.73, indicating a year-over-year improvement of 9.5% on 6.8% higher revenues of $5.4 billion. The consensus estimate for 2024 is pegged at $8.86, indicating a year-over-year improvement of 1.5% on 2.8% higher revenues of $5.5 billion. The expected long-term earnings growth rate is pegged at 4.7%.
Growth Drivers
CME Group has a solid market presence with a 90% market share of global futures trading and clearing services. Increasing electronic trading volume adds scalability and hence leverage to CME Group’s operating model.
An increase in trading volume should continue to drive 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.
Higher non-transactional revenues should boost the top line as well. The top line has improved at a five-year CAGR of 6.6%.
CME Group has a solid balance sheet and financial flexibility that support strategic growth initiatives, including organic market data growth and new product extensions and offerings, as well as prudent capital deployment.
Impressive Dividend History
Banking on operational excellence, CME Group has increased dividends at a five-year CAGR (2019-2023) of 8%. The dividend yield is 2.4%, better than the industry average of 1.7%, making the stock an attractive pick for yield-seeking investors. Also, CME Group pays five dividends per year, with the fifth being variable and based on excess cash flow in the year.
RLI delivered a four-quarter average earnings surprise of 43.50%. Year to date, the insurer has lost 1.8%. The Zacks Consensus Estimate for RLI’s 2023 and 2024 earnings indicates respective year-over-year increases of 7.9% and 3.9%.
Kinsale delivered a four-quarter average earnings surprise of 14.77%. Year to date, the insurer has gained 23.8%. The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings indicates respective year-over-year increases of 36.2% and 21.4%.
HCI Group delivered a four-quarter average earnings surprise of 308.82%. Year to date, the insurer has gained 3%. The Zacks Consensus Estimate for HCI’s 2023 and 2024 earnings indicates respective year-over-year increases of 149.3% and 35.2%.
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Here's Why You Should Consider Buying CME Group (CME) Stock
CME Group’s (CME - Free Report) global presence, compelling product portfolio, focus on over-the-counter clearing services and solid capital position make it worth adding to one’s portfolio.
This largest futures exchange in the world in terms of trading volume as well as notional value traded has a solid history of delivering earnings surprises in the last 10 reported quarters. Its earnings grew 8.2% in the last five years.
CME Group’s return on equity for the trailing 12 months was 10.9%, better than the industry average of 10.8%.
Zacks Rank and Price Performance
CME Group carries a Zacks Rank #2 (Buy) currently. Shares have gained 8.9% year to date, outperforming the industry’s increase of 5.8%.
Northbound Estimate Revision
The consensus estimate for 2023 and 2024 earnings has moved up 0.6% and 0.1%, respectively, in the past 60 days, implying analysts’ optimism.
Growth Projection
The Zacks Consensus Estimate for 2023 earnings is pegged at $8.73, indicating a year-over-year improvement of 9.5% on 6.8% higher revenues of $5.4 billion. The consensus estimate for 2024 is pegged at $8.86, indicating a year-over-year improvement of 1.5% on 2.8% higher revenues of $5.5 billion. The expected long-term earnings growth rate is pegged at 4.7%.
Growth Drivers
CME Group has a solid market presence with a 90% market share of global futures trading and clearing services. Increasing electronic trading volume adds scalability and hence leverage to CME Group’s operating model.
An increase in trading volume should continue to drive 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.
Higher non-transactional revenues should boost the top line as well. The top line has improved at a five-year CAGR of 6.6%.
CME Group has a solid balance sheet and financial flexibility that support strategic growth initiatives, including organic market data growth and new product extensions and offerings, as well as prudent capital deployment.
Impressive Dividend History
Banking on operational excellence, CME Group has increased dividends at a five-year CAGR (2019-2023) of 8%. The dividend yield is 2.4%, better than the industry average of 1.7%, making the stock an attractive pick for yield-seeking investors. Also, CME Group pays five dividends per year, with the fifth being variable and based on excess cash flow in the year.
Other Stocks to Consider
Some better-ranked stocks from the finance sector are RLI Corporation (RLI - Free Report) , Kinsale Capital Group (KNSL - Free Report) and HCI Group (HCI - Free Report) , each sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
RLI delivered a four-quarter average earnings surprise of 43.50%. Year to date, the insurer has lost 1.8%. The Zacks Consensus Estimate for RLI’s 2023 and 2024 earnings indicates respective year-over-year increases of 7.9% and 3.9%.
Kinsale delivered a four-quarter average earnings surprise of 14.77%. Year to date, the insurer has gained 23.8%. The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings indicates respective year-over-year increases of 36.2% and 21.4%.
HCI Group delivered a four-quarter average earnings surprise of 308.82%. Year to date, the insurer has gained 3%. The Zacks Consensus Estimate for HCI’s 2023 and 2024 earnings indicates respective year-over-year increases of 149.3% and 35.2%.