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CME Group (CME) Stock Rallies 28% YTD: More Upside Left?
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CME Group’s (CME - Free Report) shares have gained 28.1% year to date, outperforming the industry’s increase of 18.9%, the Finance sector’s increase of 7.4% and the Zacks S&P 500 composite’s rise of 19.4% in the same period. With a market capitalization of $77 billion, the average volume of shares traded in the last three months was 1.4 million.
A solid global presence, compelling product portfolio, focus on over-the-counter clearing services and a solid capital position continue to drive CME. The consensus estimate for 2023 and 2024 earnings of this Zacks Rank #3 (Hold) company has moved up 0.6% and 1.4%, respectively, in the past 30 days, reflecting analysts’ optimism.
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 12 reported quarters. Its earnings grew 8.2% in the last five years.
Image Source: Zacks Investment Research
Can It Retain the Momentum?
The Zacks Consensus Estimate for CME Group’s 2023 earnings is pegged at $9.14, indicating an increase of 14.7% on 9.6% higher revenues of $5.5 billion. The consensus estimate for 2024 earnings is pegged at $9.41, indicating an increase of 2.9% on 4% higher revenues of $5.7 billion.
The long-term earnings growth rate is currently pegged at 10%, better than the industry average of 7.4%. We estimate the bottom line to increase at a three-year (2022-2025) CAGR of 4.4%.
Organic growth has been CME Group’s key strength, as reflected in its revenue growth story. We estimate the 2025 top line to witness a three-year CAGR of 5.5%, fueled by clearing and transaction fees. Increased volatility aids higher trading volumes, which, in turn, fuel clearing and transaction fees that contribute the lion’s share of the top line. We estimate clearing and transaction fees to increase at a three-year CAGR (2022-2025) of 5.2%.
Volumes should benefit from its market presence with a 90% market share of global futures trading and clearing services, growing electronic trading volume and higher adoption of a greater number of crypto assets with increased interest across the entire crypto-economy. Also, CME remains focused on making investments that are showing desirable results.
CME is focusing on improving margins through cost management. It lowered its core expense guidance. It expects the metric, excluding license fees, to be $1.475 billion in 2023, a $15 million decrease from the original guidance of $1.49 billion.
A healthy balance sheet and financial flexibility support strategic growth initiatives, including organic market data growth, new product extensions and offerings, as well as capital deployment.
Banking on solid capital position and cash flows driven by operational excellence, CME Group has hiked dividends at a five-year CAGR (2019-2023) of 8%. Its dividend yield is 2.2%, better than the industry average of 1.6%, 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.
Stocks to Consider
Some better-ranked stocks from the finance sector are Cboe Global Markets (CBOE - Free Report) , Coinbase Global (COIN - Free Report) and Berkshire Hathaway Inc. (BRK.B - Free Report) .
CBOE has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 4.07%. In the past year, CBOE has gained 13.1%. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CBOE’s 2023 and 2024 earnings per share is pegged at $7.58 and $7.98, indicating a year-over-year increase of 9.4% and 4.6%, respectively.
COIN has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 62.95%. COIN stock has climbed 15.2% in the past year and carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for COIN’s 2023 and 2024 earnings per share indicates a year-over-year increase of 91.7% and 29.3%, respectively.
Berkshire delivered a trailing four-quarter average earnings surprise of 0.20%. Year to date, the stock has risen 16.5%. It carries a Zacks Rank #2.
The Zacks Consensus Estimate for BRK.B’s 2023 and 2024 earnings suggests a year-over-year rise of 16.2% and 10.8%, respectively.
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CME Group (CME) Stock Rallies 28% YTD: More Upside Left?
CME Group’s (CME - Free Report) shares have gained 28.1% year to date, outperforming the industry’s increase of 18.9%, the Finance sector’s increase of 7.4% and the Zacks S&P 500 composite’s rise of 19.4% in the same period. With a market capitalization of $77 billion, the average volume of shares traded in the last three months was 1.4 million.
A solid global presence, compelling product portfolio, focus on over-the-counter clearing services and a solid capital position continue to drive CME. The consensus estimate for 2023 and 2024 earnings of this Zacks Rank #3 (Hold) company has moved up 0.6% and 1.4%, respectively, in the past 30 days, reflecting analysts’ optimism.
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 12 reported quarters. Its earnings grew 8.2% in the last five years.
Image Source: Zacks Investment Research
Can It Retain the Momentum?
The Zacks Consensus Estimate for CME Group’s 2023 earnings is pegged at $9.14, indicating an increase of 14.7% on 9.6% higher revenues of $5.5 billion. The consensus estimate for 2024 earnings is pegged at $9.41, indicating an increase of 2.9% on 4% higher revenues of $5.7 billion.
The long-term earnings growth rate is currently pegged at 10%, better than the industry average of 7.4%. We estimate the bottom line to increase at a three-year (2022-2025) CAGR of 4.4%.
Organic growth has been CME Group’s key strength, as reflected in its revenue growth story. We estimate the 2025 top line to witness a three-year CAGR of 5.5%, fueled by clearing and transaction fees. Increased volatility aids higher trading volumes, which, in turn, fuel clearing and transaction fees that contribute the lion’s share of the top line. We estimate clearing and transaction fees to increase at a three-year CAGR (2022-2025) of 5.2%.
Volumes should benefit from its market presence with a 90% market share of global futures trading and clearing services, growing electronic trading volume and higher adoption of a greater number of crypto assets with increased interest across the entire crypto-economy. Also, CME remains focused on making investments that are showing desirable results.
CME is focusing on improving margins through cost management. It lowered its core expense guidance. It expects the metric, excluding license fees, to be $1.475 billion in 2023, a $15 million decrease from the original guidance of $1.49 billion.
A healthy balance sheet and financial flexibility support strategic growth initiatives, including organic market data growth, new product extensions and offerings, as well as capital deployment.
Banking on solid capital position and cash flows driven by operational excellence, CME Group has hiked dividends at a five-year CAGR (2019-2023) of 8%. Its dividend yield is 2.2%, better than the industry average of 1.6%, 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.
Stocks to Consider
Some better-ranked stocks from the finance sector are Cboe Global Markets (CBOE - Free Report) , Coinbase Global (COIN - Free Report) and Berkshire Hathaway Inc. (BRK.B - Free Report) .
CBOE has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 4.07%. In the past year, CBOE has gained 13.1%. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CBOE’s 2023 and 2024 earnings per share is pegged at $7.58 and $7.98, indicating a year-over-year increase of 9.4% and 4.6%, respectively.
COIN has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 62.95%. COIN stock has climbed 15.2% in the past year and carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for COIN’s 2023 and 2024 earnings per share indicates a year-over-year increase of 91.7% and 29.3%, respectively.
Berkshire delivered a trailing four-quarter average earnings surprise of 0.20%. Year to date, the stock has risen 16.5%. It carries a Zacks Rank #2.
The Zacks Consensus Estimate for BRK.B’s 2023 and 2024 earnings suggests a year-over-year rise of 16.2% and 10.8%, respectively.