CME Group's Q1 Earnings In Line with Ests - Analyst Blog

CME Group Inc. CME reported first-quarter 2014 operating earnings per share of 83 cents. Results were in line with the Zacks Consensus Estimate but outpaced the year-ago quarter figure of 73 cents.

Consequently, operating net income jumped 13.6% year over year to $277.7 million. This excluded the after-tax effect of foreign exchange transaction gains of $10.9 million during the reported quarter against losses of $8.6 million in the year-ago quarter. Including extraordinary items, GAAP net income stood at $266.8 million or 79 cents a share in the reported quarter against $235.8 million or 71 cents per share in the year-ago period.

CME Group's total revenue climbed 8.2% year over year to $777.4 million but missed the Zacks Consensus Estimate of $778 million by a whisker. Growth primarily resulted from an accretion in market data and information services as well as clearing and transaction fees due to incremental volumes within interest rate, equity index and agricultural commodities. However, lower average rate per contract as well as deteriorated revenues from access and communication fees partially offset the upside.

CME Group's average daily volume jumped 9% year over year to 13.7 million contracts in the reported quarter, primarily driven by a surge of 19% in volumes from interest rate products. However, total average rate per contract reduced 1.7% from the year-ago quarter to 76.7 cents. Nonetheless, the volumes constitute mostly lower-priced products across asset-class that require higher volume discounts.

CME Group's clearing and transaction fees rose 9.9% year over year to $652.2 million, accounting for about 84% of the total revenue. Additionally, revenues from market data and information services increased 10.5% to $89.4 million. However, revenues from access and communication fee dipped 5.1% to $20.4 million, whereas other revenues decelerated 33% to $15.4 million.

Meanwhile, total operating expenses edged up 3.1% year over year to $322.9 million. Consequently, operating income rose 12.1% to $454.5 million, modestly improving operating margin to 58.5% from 56.4% in the year-ago quarter.

CME Group recorded non-operating expenses of $8.1 million against $17.9 million in the year-ago quarter, primarily owing to lower investment income and lower borrowing costs in the reported quarter.

Financial Update

As of Mar 31, 2014, CME Group had $1.1 billion of cash and marketable securities, lower than $2.54 billion at 2013-end, while long-term debt stood at $2.1 billion, at par with the 2013-end level. The company paid off its short-term debt worth $749.9 million in Feb 2014.

As of Mar 31, 2014, CME Group had total assets of $53.17 billion (down from $54.28 billion as of Dec 31, 2013), while total equity stood at $21.31 billion (up from $21.16 billion as of Dec 31, 2013). The company did not repurchase any shares during the reported quarter.

Dividend Update

On Feb 5, 2014, the board of CME Group hiked its quarterly dividend by 4% to 47 cents per share from prior payout of 45 cents. The raised dividend was paid on Mar 25, 2014 to shareholders of record as on Mar 10.

Earlier, on Jan 14, 2014, CME Group paid an annual variable dividend of $2.60 per share to shareholders of record as on Dec 27, 2013.

Others

While CME Group carries a Zacks Rank #3 (Hold), some better-ranked financial stocks like Xoom Corp. XOOM, General Finance Corp. GFN and Euronet Worldwide Inc. EEFT,  sporting a Zacks Rank #1 (Strong Buy), are worth reckoning.