CME Group Inc. CME reported first-quarter 2015 operating earnings per share of 98 cents, beating the Zacks Consensus Estimate of 95 cents by 3.2%, but surging 18.1% from the year-ago quarter figure of 83 cents. However, the company’s trailing four-quarter average beat was a mere 1%.
Consequently, operating net income surged 18.7% year over year to $329.5 million. Including extraordinary items, GAAP net income came in at $330.4 million against $266.8 million in the year-ago quarter.
CME Group’s total revenue increased 8.4% year over year to $842.7 million, and breezed past the Zacks Consensus Estimate of $837 million. The upside was primarily attributable to improvement in clearing and transaction fees and trading volumes driven by growth incore futures products and swaps clearing, partially offset by lower average rate per contract. Incremental revenues from market data and information services, and from access and communication fees boosted results as well.
The company’s average daily volume jumped 10% year over year to 15 million contracts in the reported quarter. The improvement was led by higher contracts across all asset classes and across North America and Europe. Notably, international volumes grew about 50%, primarily contributing to volumes accretion. However, total average rate per contract of 75.3 cents was lower than 76.7 cents in the year-ago quarter.
CME Group’s clearing and transaction fees grew 8.6% year over year to $708.2 million, accounting for about 84% of the total revenue. Additionally, revenues from market data and information services increased 9.6% to $98 million. Revenues from access and communication fees rose 4.4% to $21.3 million, although other revenues dipped marginally to $15.2 million from $15.4 million in the year-ago quarter.
Meanwhile, total operating expenses rose 3.9% year over year to $335.4 million. Nevertheless, operating income escalated 11.6% to $507.3 million, while operating margin improved to 60.2% from 58.5% in the year-ago quarter.
CME Group recorded non-operating income of $16.5 million against expenses of $8.1 million in the year-ago quarter, reflecting lower borrowing costs and higher equity and investment earnings in the reported quarter.
Financial Update
As of Mar 31, 2015, CME Group had $1.8 billion of cash and marketable securities, higher than $1.44 billion at 2014-end, while long-term debt was $2.85 billion, up from $2.11 billion at 2014-end level.
As of Mar 31, 2015, the company had total assets of $77.13 billion (up from $72.24 billion as of Dec 31, 2014), while total equity came in at $21.1 billion (down from $20.92 billion as of Dec 31, 2014). CME Group did not repurchase any shares during the reported quarter.
Guidance
In Oct 2014, management anticipated total core operating expenses for 2015 to be in line with 2014-level.
Dividend Update
On Feb 4, 2015, the board of CME Group hiked its regular quarterly dividend by 6.4% to 50 cents from the prior payout of 47 cents per share. The raised dividend was paid on Mar 25, to shareholders of record as on Mar 10. Previously, the company had increased its quarterly dividend by 4% in Feb 2014.
On Jan 13, 2015, the company paid a special annual variable dividend of $2.00 per share, totaling about $673 million, to shareholders of record as on Dec 29, 2014. This is in addition to the four regular quarterly dividend payouts, marking the third such payout in the history of CME Group.
Zacks Rank
Currently, CME Group carries a Zacks Rank #3 (Hold).
Peer Take
CME Group’s prime peer, Intercontinental Exchange Inc. ICE is slated to release first-quarter 2015 results before the opening bell on May 5, 2015.
Another peer, CBOE Holdings Inc. CBOE is slated to release its first-quarter 2015 financials before the opening bell on May 1, 2015.
Markit Ltd. MRKT will likely release its first-quarter earnings before the opening bell on May 13, 2015.
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