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Why Is CBOE Holdings (CBOE) Up 12% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for CBOE Holdings, Inc. (CBOE - Free Report) . Shares have added about 12.% in that time frame.

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

Cboe Global Q4 Earnings Miss Estimates, Issues View

Cboe Global Markets’ fourth-quarter 2017 adjusted earnings of 87 cents per share missed the Zacks Consensus Estimate of 88 cents by 1.14%. However, the bottom line improved 12% year over year on the back of higher revenues, partially offset by increased expenses. The metric also benefited from the enactment of Tax Reform.

The company further recorded expanded trading volume in the reported quarter.

Operational Details

Total revenues came in at $266 million, which missed the Zacks Consensus Estimate by 0.94%. The top line however, surged 86% year over year on contribution from Bats buyouts and higher net transaction fees.

Average daily volume for Options was 7.029 million, up nearly 9% year over year while that of Futures was 0.3 million, up nearly 20.8% year over year.

Total revenues per contract for Options rose 2% year over year to 23.9 cents. Total RPC for U.S. Futures increased 6.9% year over year to $1.799.

Total operating expenses inched up 0.4% year over year to $105 million on higher compensation and benefits expense. Adjusted operating margin expanded 260 basis points year over year to 60.5%.

Full-Year Highlights

Cboe Global Markets posted adjusted earnings of $3.57 per share on revenues of $995.6 million. While the top line improved 12%, the bottom line surged 57% over 2016.

2017 marks the record-setting year for trading in VIX Futures, VIX Options and SPX Options Volume.

The company realized cost synergies of about $25 million due to Bats acquisition.

Cboe Global Markets lowered debts by $400 million.

Financial Update

As of Dec 31, 2017, CBOE Holdings had cash and cash equivalents of $143.5 million, up 47.5% from $97.3 million at the end of 2016. Total assets were $5.3 billion at 2017-end compared with $476.7 million at year-end 2016.

Total shareholders’ equity was $3.1 billion at 2017-end compared with $317.9 million as of Dec 31, 2016.

Dividend Update

The company paid cash dividends worth $30.6 million or 27 cents per share in the quarter.

2018 Outlook

Adjusted operating expenses are predicted between $420 million and $428 million, an increase of 1-3% over 2017.

Depreciation and amortization expenses (included in adjusted operating expenses) are projected in the range of $53-$58 million excluding the amortization of acquired intangibles of $157 million.

Capital expenditures are estimated in the band of $50-$55 million.

The effective tax rate is anticipated within 26.5-28.5%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. 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

Currently, CBOE has a nice Growth Score of B, though it is lagging a lot on the momentum front with a D. 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.

The company's stock is suitable solely for growth based on our styles scores.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, CBOE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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