Back to top

Can Higher Revenues Boost CME Group's (CME) Q1 Earnings?

Read MoreHide Full Article

CME Group Inc. (CME - Free Report) is set to report first-quarter 2018 earnings on Apr 26 before the market opens. Notably, the company delivered a positive surprise in all the last four quarters.

Let’s see, what is in store for the company this yet-to-be reported quarter.

Factors to be Considered This Quarter

CME Group is likely to report top-line growth in the soon-to-be-reported quarter, fueled by higher clearing and transaction fees plus access and communication fees. The Zacks Consensus Estimate for clearing and transaction fees is pegged at $865 million and for access and communication fees stands at $26.03 million, highlighting an increase of 9.2% and 7.1%, respectively, on a year-over-year basis.

Moreover, revenues in the first quarter are anticipated to have gained from expansion of futures products in the emerging markets, non-transaction related opportunities, OTC (over the counter) offerings as well as options business. The Zacks Consensus Estimate for the metric is pegged at $1.1 billion, translating into a 20.8% rise on a year-over-year basis.

Also, the company’s efforts to accelerate organic market data growth might have contributed to its top line. The Zacks Consensus Estimate for market data and information services is pegged at $101 million, indicating a 4.1% increase from the year-ago quarter.

For the first quarter of 2018, average daily volumes (ADV) were 19.2 million contracts, having improved 12.1% year over year as the company witnessed higher volumes across all its product lines.

Additionally, the tax cut, which reduced the tax rate to 21% from 35%, will aid the companies’ bottom line, thereby boosting margins directly.

The Zacks Consensus Estimate for earnings is pegged at $1.85 per share, reflecting a rise of 51.6% on a year-over-year basis.

However, the company is likely to witness a rise in expenses in the yet-to-be-reported quarter, mainly due to its investments in several strategic initiatives. Management projects adjusted total operating expenses guidance excluding licensing fees to range between $1.10 billion and $1.11 billion in 2018.

CME Group Inc. Price and EPS Surprise


CME Group Inc. Price and EPS Surprise | CME Group Inc. Quote


What Our Quantitative Model Predicts

Our proven model does not conclusively show that CME Group is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: CME Group has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.85. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: CME Group carries a Zacks Rank #2, which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against the Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks worth considering from the finance sector with the right combination of elements to surpass estimates this time around are as follows:

Kemper Corporation (KMPR - Free Report) is set to report first-quarter earnings on Apr 30. The stock has an Earnings ESP of +23.79% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Allstate Corporation (ALL - Free Report) has an Earnings ESP of +3.79% and a Zacks Rank of 3. The company is scheduled to announce first-quarter earnings on May 1.

American Financial Group, Inc. (AFG - Free Report) has an Earnings ESP of +2.40% and a Zacks Rank of 2. The company is slated to release first-quarter earnings on May 2.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

More from Zacks Analyst Blog

You May Like