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Why Is CBOE Holdings (CBOE) Up 9.3% Since the Last Earnings Report?

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About a month has gone by since the last earnings report for CBOE Holdings, Inc. (CBOE - Free Report) . Shares have added about 9.3% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

CBOE Holdings Q2 Earnings Beat, Trading Volumes Surge

CBOE Holdings’ second-quarter 2017 adjusted earnings of 87 cents per share beat the Zacks Consensus Estimate of 86 cents by 1.16%. Also, the bottom line jumped 16% year over year.

Results were driven by higher revenues, partially offset by increased expenses. The company recorded increased trading volume in the quarter.

On a GAAP basis, net income allocated to common stockholders was 60 cents per share, up 13.2% year over year.

Operational Details

In the second quarter, total revenue came in at $266.9 million which was in line with the Zacks Consensus Estimate. Revenues however improved 85.2% year over year.

Net revenue came in at $114.9 million. The upside came on the back of Bats Global Markets for March as well as an increase in transaction fees and other revenues.

Average daily volume for Options were 7.035 million, up 15.1% year over year while that of Futures was 0.3 million, up nearly 19% year over year.

Total revenue per contract for Options declined 8.2% year over year to 22.5 cents. Total RPC for U.S. Futures increased 4.8% year over year to $1.762.

Total operating expenses increased 57% year over year to $101.3 million, primarily due to higher professional fees and outside services, compensation and benefits, depreciation and amortization, technology support services, travel and promotional expenses, facilitate and acquisition related costs, as well as change in contingent consideration and other expenses.

On a combined adjusted basis, expenses declined 5.3% from the prior-year quarter.

Adjusted operating margin expanded 680 basis points year over year to 62%.

Financial Update

As of Jun 30, 2017, CBOE Holdings had cash and cash equivalents of $148.6 million, down 52.7% from $97.3 million at the end of 2016. Total assets were $5.4 billion at the end of the second quarter as against $476.7 million at year-end 2016.

Total shareholders’ equity was $2.8 billion at the end of the reported quarter compared with $317.9 million as of Dec 31, 2016.

Net operating cash flow came in at $172.1 million in the second quarter, compared to $114.9 million in the year-ago quarter.

Dividend Update

In Jul 28, 2017, board of directors raised the dividend by 8% to 27 cents per share. The dividend will be paid on Sep 15 to shareholders on record as of Sep 1.

The company paid cash dividends worth $28 million or 25 cents per share in the reported quarter.

2017 Outlook

The guidance for full-year 2017 takes into account the company’s acquisition of Bats Global Markets.

Adjusted operating expenses are expected in the range of $415–$423 million (down 1% to up 1% year over year) compared with $417 million in 2016.

Depreciation and amortization expenses (included in adjusted operating expenses) are projected in the range of $52–$54 million, excluding the amortization of acquired intangibles of $169 million. Capital expenditures are estimated in the range of $55–$60 million based on the company's ongoing investments in systems hardware and software, including CBOE Holdings' systems migration to Bats Global Markets’ technology.

The effective tax rate is likely to be within 35.5–37.5%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimate have trended upward during the past month. There have been two revisions higher for the current quarter.

CBOE Holdings, Inc. Price and Consensus

 

CBOE Holdings, Inc. Price and Consensus | CBOE Holdings, Inc. Quote

VGM Scores

At this time, the stock has an average Growth Score of C, however its Momentum is doing a lot better with an B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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