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CME Group (CME) Q2 Earnings Top, Revenues Lag, Expenses Fall

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CME Group Inc. (CME - Free Report) reported second-quarter 2017 adjusted earnings per share of $1.23, beating the Zacks Consensus Estimate of $1.20. The bottom line also increased 7.9% year over year.

Results were primarily driven by lower expenses. The quarter witnessed a record average daily volume (ADV).

CME Group Inc. Price, Consensus and EPS Surprise

Including one-time items, the net income was $1.22 per share, up 32% year over year.

Performance in Detail

CME Group’s revenues of $925 million increased 2.1% year over year. However, the reported figure missed the Zacks Consensus Estimate of $930 million. Improvement in revenues may be attributable to higher clearing and transaction fees, plus access and communication fees.

Total expenses decreased 7% year over year to $319 million during the reported quarter.

Operating income improved about 7.5% to $605.6 million from the prior-year quarter.

Average daily volume (ADV) rose 9% year over year to a record 16.5 million contracts, with growth registered across four of the six product lines. Average rate per contract increased in three of the six product lines.

Financial Update

As of Jun 30, 2017, CME Group had $1.4 billion of cash and marketable securities, down 26% from year-end 2016. As of Jun 30, 2017, the long-term debt of $2.2 billion inched up 0.04% from the last year-end figure.

As of Jun 30, 2017, the company had total assets worth $78.5 billion, up from $69.4 billion at year-end 2016.

The company paid dividends worth $223 million in the reported quarter.

Our Take

CME Group’s results reflect a solid performance. The company remains well-positioned for growth, given its strong market position with diverse derivative product lines. Efforts to expand and cross-sell core exchange-traded business through strategic alliances & acquisitions, new product initiatives and global reach, support growth. However, escalating costs and stiff competition remain key challenges.

Currently, CME Group carries a Zacks Rank # 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Companies in Securities Exchange Industry

MarketAxess Holdings Inc. (MKTX - Free Report) and Nasdaq, Inc. (NDAQ - Free Report) beat their respective Zacks Consensus Estimate in the second quarter.

Intercontinental Exchange Inc. (ICE - Free Report) will report second-quarter results on Aug 3 before the market opens.

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