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Can CME Group (CME) Maintain Its Earnings Streak in Q2?

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We expect securities exchange CME Group Inc (CME - Free Report) to beat expectations, when it reports second-quarter 2017 results on Jul 27, before the market opens.

Why a Likely Positive Surprise?

Our proven model shows that Progressive has the right combination of two key ingredients to beat estimates.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.83%. This is because the Most Accurate estimate of $1.21 is pegged higher than the Zacks Consensus Estimate of $1.20 per share. The positive ESP is a leading indicator of a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CME Group carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating on earnings.

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

What is Driving the Better-Than-Expected Earnings?

Diverse derivative product lines and global reach likely have induced an improved top line in the soon-to-be-reported quarter.

CME Group’s average daily volume (ADV) for its second quarter stood at 16.5 million contracts, up 7% year over year. The company experienced an improvement of 21% year over year in Options volume, which averaged 3.6 million contracts per day. Interest rate volume jumped 19% year over year in the second quarter, with 8.2 million contracts per day.

Total Options average revenue per contract (RPC) is expected to be 22.9 cents for the second quarter of 2017. RPC for Futures is expected to be slightly lower than the RPC of Options.

Given strategic investments in several areas, the organic market data revenue has likely improved.

However, expenses are expected to have increased, owing to several ongoing investments in strategic initiatives and have also possibly weighed on margin expansion.

With respect to earnings trend, the company delivered positive surprises in the last four quarters, with an average beat of 2.24%.  

The company’s share price has been fluctuating over the last few days and is currently trading at $121.00. We wait to see how the stock performs post the earnings release.

CME Group Inc. Price and EPS Surprise

Other Stocks to Consider

Some other stocks worth considering in the finance sector with the right combination of elements to come up with an earnings beat this quarter are:

Intercontinental Exchange Inc. (ICE - Free Report) is set to report its second-quarter earnings on Aug 3. The stock has an Earnings ESP of +1.33% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

W.R. Berkley Corporation (WRB - Free Report) is set to report its second-quarter earnings on Jul 25. The stock has an Earnings ESP of +2.67% and a Zacks Rank #3.

CNA Financial Corporation (CNA - Free Report) has an Earnings ESP of +4.00% and a Zacks Rank #3. The company is set to report its second-quarter earnings on Jul 31.

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