CME Group Inc. (CME - Free Report) is poised for long-term growth on the back of enhancing product portfolio and expanding market presence, owing to varied derivative product lines and strong capital position. The company has a favorable Growth Score of B. This style score analyzes the company’s growth prospects. Its expected long-term earnings growth rate is 11.2%, better than the industry’s average of 9%.
In 2018, the company’s revenues grew 15% and the bottom line improved 43% year over year. Its fourth-quarter performance was strong, primarily attributable to high volatility.
The company’s top line continues to benefit from higher clearing and transaction fees, plus access and communication fees. Expansion of futures products in emerging markets, non-transaction related opportunities, OTC offerings and strong momentum in options business should remain growth drivers for CME Group. The company leads with about 90% market share of the global futures trading and clearing services.
CME Group remains focused on investments in several areas, including organic market data growth, and new product extensions and offerings. Management estimates organic market data revenue growth of 5-6% over the next few years.
The buyout of London-based NEX Group plc in November 2018 is expected to help it emerge as a cross-border trading powerhouse. CME Group estimates $200 million in run-rate cost synergies annually by the end of 2021 from this buyout.
With respect to expense management, the company targets $50 million run-rate synergies by 2019-end.
Shares of this Zacks Rank #3 (Hold) securities exchange have gained 1% year to date, underperforming the industry’s 2.2% growth.
CME Group has a strong capital management policy in place. The company pays five dividends per year, with the fifth being variable, which is based on excess cash flow in the year. With the latest dividend hike of 7%, the company increased annual dividend by nearly 60%, making it an attractive pick for yield-seeking investors.
The Zacks Consensus Estimate for 2019 earnings and revenues indicates year-over-year improvement of 3.4% and 13.5%, respectively. Earnings and revenues in 2019 are estimated to record a year-over-year increase 5.6% and 4.9%, respectively.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Arch Capital Group Ltd. (ACGL - Free Report) , Berkshire Hathaway Inc. (BRK.B - Free Report) and Torchmark Corporation (TMK - Free Report) .
Arch Capital Group provides property, casualty and mortgage insurance and reinsurance products on a worldwide basis. The company delivered positive surprises in all the last four quarters, with the average being 14.72%. It has a Zacks Rank of 2 (Buy). You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Berkshire Hathaway provides property and casualty insurance and reinsurance plus life, accident and health reinsurance, apart from operating railroad systems in North America. The company came up with positive surprises in three of the preceding four quarters, with the average beat being 4.31%. The company is a Zacks #1 Ranked player.
Torchmark provides various life and health insurance products, and annuities in the United States, Canada and New Zealand. The company pulled off positive surprises in three of the preceding four quarters, with the average beat being 2%. The company holds a Zacks Rank #2.
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