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Here's Why You Should Stay Invested in CME Group (CME) Stock
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CME Group (CME - Free Report) is well-poised to grow, banking on the strength of its global presence, a compelling product portfolio, increased electronic trading, its focus on over-the-counter clearing services and a solid capital position. These, coupled with optimistic growth projections, make the stock worth retaining in one’s portfolio.
Shares of this largest futures exchange in the world in terms of trading volume as well as notional value traded have gained 17% in a year compared with the industry’s growth of 30.7%.
The Zacks Consensus Estimate for CME’s 2024 and 2025 bottom line has moved 1.7% and 1.6% north in the past 30 days, reflecting analyst optimism.
This Zacks Rank #3 (Hold) company has a solid history of delivering earnings surprises in the last 14 reported quarters. Its earnings grew 8.7% in the last five years.
Image Source: Zacks Investment Research
Growth Drivers
CME Group’s strength lies in its organic growth. It has a 90% market share of global futures trading and clearing services. With increased interest across the entire crypto economy, CME Group is witnessing growth in electronic trading volume and higher adoption of crypto assets. In 2023, 92% of the overall contract volume was generated through electronic trading on the CME Globex electronic platform.
Clearing and transaction fees, which contribute a major share of the top line, continue to benefit from increased volatility that aids trading volumes. We estimate clearing and transaction fees to increase at a three-year CAGR (2023-2026) of 4.2%.
CME’s investments are also showing desirable results. CME is focusing on improving margins through cost management. It expects its core expense to be $1.585 billion in 2024.
A solid capital position continues to support CME Group in deploying funds for strategic organic initiatives, expanding its product breadth and engaging in capital deployment.
The Zacks Consensus Estimate for CME Group’s 2024 earnings per share (EPS) is pegged at $9.72, indicating an increase of 4.1% on 5.8% higher revenues of $5.9 billion. The consensus estimate for 2025 EPS is pegged at $9.81, indicating an increase of 0.9% on 3.2% higher revenues of $6.1 billion. The long-term earnings growth rate is currently pegged at 4.6%. We estimate the bottom line to increase at a three-year (2023-2026) CAGR of 2.9%.
CME Group has been distributing wealth to shareholders by increasing payouts. It hiked dividends at a five-year CAGR (2019-2023) of 8%. Its dividend yield is 2.2%, better than the industry’s 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 a year.
Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.
Coinbase delivered a trailing four-quarter average earnings surprise of 364.63%. COIN stock has gained 17.5% year to date. The Zacks Consensus Estimate for COIN’s 2024 EPS indicates a year-over-year increase of 1,804.5%.
The Zacks Consensus Estimate for First BanCorp’s 2024 and 2025 EPS indicates a year-over-year increase of 3.5% and 6.2%, respectively. Year to date, FBP has gained 10.4%. First BanCorp delivered a trailing four-quarter average earnings surprise of 17.05%.
Morgan Stanley delivered a trailing four-quarter average earnings surprise of 11.15%. Year to date, the stock has risen 6.6%. The Zacks Consensus Estimate for MS’s 2024 and 2025 earnings suggests a year-over-year rise of 25.3% and 13.3%, respectively.
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Here's Why You Should Stay Invested in CME Group (CME) Stock
CME Group (CME - Free Report) is well-poised to grow, banking on the strength of its global presence, a compelling product portfolio, increased electronic trading, its focus on over-the-counter clearing services and a solid capital position. These, coupled with optimistic growth projections, make the stock worth retaining in one’s portfolio.
Shares of this largest futures exchange in the world in terms of trading volume as well as notional value traded have gained 17% in a year compared with the industry’s growth of 30.7%.
The Zacks Consensus Estimate for CME’s 2024 and 2025 bottom line has moved 1.7% and 1.6% north in the past 30 days, reflecting analyst optimism.
This Zacks Rank #3 (Hold) company has a solid history of delivering earnings surprises in the last 14 reported quarters. Its earnings grew 8.7% in the last five years.
Image Source: Zacks Investment Research
Growth Drivers
CME Group’s strength lies in its organic growth. It has a 90% market share of global futures trading and clearing services. With increased interest across the entire crypto economy, CME Group is witnessing growth in electronic trading volume and higher adoption of crypto assets. In 2023, 92% of the overall contract volume was generated through electronic trading on the CME Globex electronic platform.
Clearing and transaction fees, which contribute a major share of the top line, continue to benefit from increased volatility that aids trading volumes. We estimate clearing and transaction fees to increase at a three-year CAGR (2023-2026) of 4.2%.
CME’s investments are also showing desirable results. CME is focusing on improving margins through cost management. It expects its core expense to be $1.585 billion in 2024.
A solid capital position continues to support CME Group in deploying funds for strategic organic initiatives, expanding its product breadth and engaging in capital deployment.
The Zacks Consensus Estimate for CME Group’s 2024 earnings per share (EPS) is pegged at $9.72, indicating an increase of 4.1% on 5.8% higher revenues of $5.9 billion. The consensus estimate for 2025 EPS is pegged at $9.81, indicating an increase of 0.9% on 3.2% higher revenues of $6.1 billion. The long-term earnings growth rate is currently pegged at 4.6%. We estimate the bottom line to increase at a three-year (2023-2026) CAGR of 2.9%.
CME Group has been distributing wealth to shareholders by increasing payouts. It hiked dividends at a five-year CAGR (2019-2023) of 8%. Its dividend yield is 2.2%, better than the industry’s 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 a year.
Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.
Stocks to Consider
Some better-ranked stocks from the finance sector are Coinbase Global (COIN - Free Report) , First BanCorp (FBP - Free Report) and Morgan Stanley (MS - Free Report) . Each stock presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Coinbase delivered a trailing four-quarter average earnings surprise of 364.63%. COIN stock has gained 17.5% year to date. The Zacks Consensus Estimate for COIN’s 2024 EPS indicates a year-over-year increase of 1,804.5%.
The Zacks Consensus Estimate for First BanCorp’s 2024 and 2025 EPS indicates a year-over-year increase of 3.5% and 6.2%, respectively. Year to date, FBP has gained 10.4%. First BanCorp delivered a trailing four-quarter average earnings surprise of 17.05%.
Morgan Stanley delivered a trailing four-quarter average earnings surprise of 11.15%. Year to date, the stock has risen 6.6%. The Zacks Consensus Estimate for MS’s 2024 and 2025 earnings suggests a year-over-year rise of 25.3% and 13.3%, respectively.