CBOE Holdings Upgraded to Strong Buy

On Jun 25, Zacks Investment Research upgraded CBOE Holdings, Inc. (CBOE) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

CBOE Holdings has been witnessing rising earnings estimates on the back of strong first-quarter results followed by sturdy trading volume in May. Moreover, this securities exchange delivered positive earnings surprises in the last 4 quarters with an average beat of 7.4%. The long-term expected earnings growth rate for this stock is 11.5%.

CBOE Holdings reported first quarter results on May 3. Non-GAAP earnings per share came in at 48 cents, surpassing the Zacks Consensus Estimate of 47 cents by 2.1% and the year-ago earnings of 37 cents by 35%.

Earnings were primarily aided by strong growth in the proprietary products of CBOE. Trading volume in the VIX Index options and futures reached new records, while trading in the S&P 500 options complex also increased considerably, driven by an increase in SPX Weeklys.

Additionally, trading volumes in May touched the highest mark in 2013. May trading volume for options contracts on CBOE and C2 Options Exchange (C2SM) and futures contracts on CBOE Futures Exchange, LLC (CFE®) totaled 107.14 million contracts. Average daily volume in May improved 4% sequentially to 4.87 million contracts.

CBOE Holdings also rewards its shareholders with a dividend yield of 1.36%. However, it lags the yield of other securities exchanges like The Nasdaq OMX Group, Inc. (NDAQ) (1.61%) and CME Group Inc. (CME) (2.36%).

The Zacks Consensus Estimate for 2013 increased 4.2% to $1.99 per share as most of the estimates were revised higher over the last 60 days. For 2014, 5 of 12 estimates were revised higher over the same period, lifting the Zacks Consensus Estimate by 5.1% to $2.26 per share.

Other Stock to Consider

Apart from CBOE Holdings, MarketAxess Holdings Inc. (MKTX), which carries a Zacks Rank #2 (Buy), is worth considering.

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