Shares of CME Group Inc. (CME) have scaled a new 52-week high at $86.80 on Dec 3, jumping 13.4% since the beginning of 2014. Notably, the stock has consistently risen 6.4% since its third-quarter earnings release on Oct 30.
While about 1.42 million shares exchanged hands in the latest trading session, the average volume of shares traded over the last three months stands at approximately 1,605.3K. Yesterday’s closing price represents a modest six-month return of about 22.2%, against 10.1% clocked by the Nasdaq index.
The company is the largest global exchange operator with respect to market capitalization. Notably, CME Group’s market capitalization of about $29 billion, at the end of last trading session, outpaced that of archrivals like Intercontinental Exchange Inc.’s (ICE) about $26 billion and CBOE Holdings Inc.’s (CBOE) about $5 billion.
Rationale
The steady appreciation in stock price is likely led by improved trading volumes, non-transaction revenue, controlled expenses and an inorganic growth strategy. Stable fundamental growth also places CME Group in a strong competitive position. The company’s tightened expense guidance for 2014 further raises optimism.
Additionally, this Zacks Rank #2 (Buy) stock generated earnings of 84 cents per share in third-quarter 2014, surpassing the Zacks Consensus Estimate by 2.4% and exceeding the year-ago figure by 12%.
Meanwhile, growth initiatives through launch of new energy, foreign exchange, oil and commodity contracts to stay ahead in competition remain impressive. In particular, the latest increase in the purchase price of GFI Group Inc. (GFIG) has received positive response from the market given CME Group’s adequate liquidity and risk-free balance sheet. The pending acquisition boosts long-term growth prospects.
While stringent regulations, interest rate volatility and pricing pressure may likely pose operational and financial risks, we believe CME Group has the potential to steer clear of these challenges and generate desired growth in the future.
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