CBOE Holdings Inc. CBOE reported third-quarter 2015 operating earnings of 76 cents per share, which surpassed the Zacks Consensus Estimate by 4.1% and also the year-ago quarter result by 33.3%.
This mark three straight quarters of positive earnings surprise with an average beat of 5.4%. The bottom-line growth was attributable to strategic initiatives taken by the company for product development, growing customer base and top line growth. CBOE Holdings also benefited from its proprietary products.
Total operating revenue soared 25.6% year over year to $187 million. It also came in above the Zacks Consensus Estimate of $184 million. Revenues grew primarily due to a 38.8% surge in transaction fees and 15.7% higher exchange services and other fees. However, the top-line growth was limited by lower access fees, market data fees, regulatory fees and other revenues.
CBOE Holdings reported record trading volume during the third quarter. Total trading volume of CBOE Holdings increased 5.9% year over year to 335.7 contracts despite a low trading volume environment. Also, revenue per contract (RPC) increased 31% year over year to 43.1 cents.
Total operating expenses increased 16.4% year over year to $85.9 million, primarily due to higher compensation and benefits, depreciation and amortization and royalty fees.
Operating margin during the reported quarter improved 370 basis points year over year to 54.1% due to a higher revenue base.
Financial Update
As of Sep 30, 2015, CBOE Holdings had cash and cash equivalents of $121.7 million, down from $147.9 million at the end of 2014. Total assets came in at $397.4 million at the end of Sep 2015, down from $383.9 million at year-end 2014.
Long-term liabilities improved to $58.9 million from $60.2 million at year-end 2014, while total shareholders’ equity rose 3.9% to $397.4 million from the 2014-end level.
Net operating cash flow climbed 5.5% year over year to $194.1 million during the first nine months of the year.
Share Repurchase Update
CBOE Holdings bought back about 0.3 million shares for $18.8 million during the reported quarter. Notably, 9.5 million shares worth $407.8 million have been repurchased since the inception of the share buyback program in 2011. The company had about $92 million worth remaining under its authorization at Sep 30, 2015.
Dividend Update
On Oct 28, 2015, the board of directors of CBOE Holdings announced a quarterly dividend of 23 cents per share, which will be paid on Dec 18 to shareholders on record as of Dec 4, 2015. In June, the company approved a 10% increase in its quarterly dividend to 23 cents per share compared with 21 cents paid previously. The company regularly shares its profits with shareholders and with the latest hike the company’s quarterly dividend has more than doubled since 2010.
2015 Outlook
CBOE Holdings raised its outlook for 2015. Core operating expenses are now estimated to be in the range of $194–196 million compared to previously guided range of $190–194 million, reflecting higher incentive-based compensation.
Meanwhile, depreciation and amortization expenses continue to be projected in the $46–48 million band. Continuing stock-based compensation expenses, included in core expenses, are expected to be about $12 million in 2015. The effective tax rate will likely be within 38.5–39.5%. Capital expenditure is projected in the range of $37–$40 million.
Zacks Rank
CBOE Holdings presently sports a Zacks Rank #1 (Strong Buy). Among the other stocks in the securities exchange space, Nasdaq, Inc. NDAQ reported third-quarter 2015 earnings per share of 88 cents beating the Zacks Consensus Estimate by 2.3%, while the earnings at MarketAxess Holdings Inc. MKTX missed the same. CME Group Inc. CME reported third-quarter 2015 adjusted earnings per share of $1.02 beating the Zacks consensus Estimate by 4.1%.
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