CME Group Inc. (CME) reported third-quarter 2014 operating earnings per share of 84 cents, which exceeded the Zacks Consensus Estimate by 2 cents and improved from the year-ago quarter figure of 75 cents. However, the company’s average four-quarter miss stands at 1.5%.
Consequently, operating net income soared 12.2% year over year to $280.8 million. Including extraordinary items, GAAP net income stood at $290 million or 86 cents a share in the reported quarter against $236.7 million or 71 cents per share in the year-ago period.
CME Group’s total revenue climbed 6.7% year over year to $762.4 million, but missed the Zacks Consensus Estimate of $768 million. The year-over-year upside was primarily attributable to improvement in clearing and transaction fees and trading volumes, along with lower average rate per contract. Moreover, incremental revenues from market data and information services as well as from access and communication fees boosted results.
The company’s average daily volume increased 12% year over year to 13.5 million contracts in the reported quarter. The improvement was led by higher contracts across interest rate, equity, agricultural commodities and foreign exchange, partially offset by deterioration in the energy and metal asset classes.
Total volumes grew 7% and constituted mostly lower-priced financial products, which require higher volume discounts. Meanwhile, total average rate per contract of 72.5 cents was lower than 74.9 cents in the prior quarter and 76.2 cents in the year-ago quarter.
CME Group’s clearing and transaction fees rose 7.3% year over year to $641.8 million, accounting for about 84% of total revenue. Additionally, revenues from market data and information services increased 11.6% to $87.7 million. Revenues from access and communication fee nudged up 2.5% to $20.8 million, while other revenues declined 32% to $12.1 million.
Meanwhile, total operating expenses rose 5.7% year over year to $332 million. Consequently, operating income plunged 7.5% to $430.4 million, and the operating margin improved slightly to 56.5% from 56% in the year-ago quarter.
CME Group recorded non-operating expense of $1.3 million against $1.6 million in the year-ago quarter, reflecting lower investment income and lower borrowing costs in the reported quarter.
Financial Update
As of Sep 30, 2014, CME Group had $1.16 billion of cash and marketable securities, lower than $2.54 billion at 2013-end, while long-term debt was $2.1 billion, at par with the 2013-end level.
As of Sep 30, 2014, the company had total assets of $63.97 billion (down from $54.28 billion as of Dec 31, 2013), while total equity came in at $21.54 billion (up from $21.16 billion as of Dec 31, 2013). CME Group did not repurchase any shares during the reported quarter.
Guidance
Management expects total core operating expenses to be about $1.3 billion in 2014, at the lower end of prior estimate, and be essentially flat in 2015. This estimate excludes any expenses related to the pending acquisition of GFI Group.
Zacks Rank
Currently, CME Group carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked financial stocks like Markit Ltd. (MRKT), MarketAxess Holdings Inc. (MKTX) and Portfolio Recovery Associates Inc. (PRAA), all bearing a Zacks Rank #2 (Buy), are worth reckoning.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment