Global futures exchange CME Group Inc. (CME) is scheduled to release its first-quarter 2014 financial results before the opening bell on May 1.
In the last reported fourth-quarter 2013, the company had delivered a 4.5% negative earnings surprise, although the four-quarter trailing average beat is pegged at 0.5%. Let’s see how things are shaping up for this announcement.
Factors Grabbing Our Attention
CME Group is poised to benefit from a diverse derivative- product line and gradual clearance of regulatory clouds should drive volumes in the future, although it also indicates higher infrastructure costs. The upcoming launch of derivatives exchange in London, after being twice delayed and approved in Mar 2014, along with the launch of Euro-denominated deliverable interest rate swaps (IRS) Futures (Euro DSF) contracts in Apr 2014 should help boost momentum.
However, interest rate volatility, higher tax rate, risks from OTC markets and lack of a significant growth catalyst amid intense competition pose operational and financial risks. Alongside, a weak capital market and limited fund resources have also impelled CME Group to delay its current share repurchase program, although dividend payouts continue to sustain investor confidence.
Although the current scenario appears bleak, CME Group’s efforts to promote, expand and cross-sell its core exchange-traded business through strategic alliances, meaningful acquisitions and latest product initiatives along with its global presence augur decent growth.
Earnings Whispers?
Our proven model shows that CME Group is unlikely to beat earnings as it lacks the required combination of two key ingredients.
Zacks ESP: The Most Accurate estimate of 83 cents per share is at par with the Zacks Consensus Estimate of CME Group. Hence, the Expected Surprise Prediction or Earnings ESP, which is the difference between the aforementioned estimates,is 0.00%.
Zacks Rank: CME Group has a Zacks Rank #3 (Hold). Note that stocks with Zacks Rank #1, 2 and 3 have significantly higher chances of beating earnings. Conversely, Sell-rated stocks (#4 and 5) are kept under the radar and are never considered going into the earnings announcement.
The combination of CME Group’s Zacks Rank #3 and 0.00% ESP makes surprise prediction difficult.
Other Stocks to Consider
Here are some other financial companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this coming quarter:
Everest Re Group Ltd. (RE), earnings ESP of +7.85% and a Zacks Rank #1 (Strong Buy).
Lazard Ltd. (LAZ), earnings ESP of +1.82% and a Zacks Rank #1.
CBOE Holdings Inc. (CBOE), earnings ESP of +3.70% and a Zacks Rank #3 (Hold).
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