CBOE Earnings Shine on Higher Volumes - Analyst Blog

By
A A A

CBOE Holdings Inc. ( CBOE ) reported first-quarter 2014 operating earnings of 58 cents per share, which modestly outpaced the Zacks Consensus Estimate of 55 cents per share and the year-ago figure of 50 cents. Accordingly, operating net income grew 14% year over year to $50 million.

Including extraordinary items, reported net income escalated to $48.5 million or 56 cents a share from $41.8 million or 48 cents per share in the year-ago quarter.

Total operating revenue jumped 11% year over year to $157.9 million and outbeat the Zacks Consensus Estimate of $156 million. Higher revenues were driven by transaction fees of $112.8 million (up 13.8% year over year), exchange services and other fees of $9.5 million (up 4.4%), market data fees of $7.2 million (up 30.9%) and regulatory fees of $9.9 million (up 2.1%). These were partially offset by a decline in access fees of $15.2 million (down 3.2%) and other revenue of $3.3 million (down 5.6%).

Average daily volume escalated 29% year over year to 5.62 million, whereas total trading volume spiked 31% to $342.8 million, driven by improvement across asset class. However, average revenue per contract plunged 13% to 32.9 cents due to higher volume-based incentives for some of the multiply-listed options along with a shift in the product-mix.

Total operating expenses rose 4% year over year to $75.9 million. Adjusting for volume-based expenses, depreciation and amortization, accelerated stock-based compensation expense and unusual or one-time expenses, core operating expenses increased 5% to $73.3 million in the quarter. The increase primarily resulted from higher employee costs, data processing, depreciation and amortization, royalty fees and trading volume incentives.

Subsequently, core operating income jumped 16.5% year over year to $84.6 million. Core operating margin improved to 53.6% from 50.9% in the year-ago period. However, effective tax rate rose to 39.9% from 38.3% in the year-ago quarter.

Financial Update

As of Mar 31, 2014, CBOE Holdings had cash and cash equivalents of $199.1 million, down from $221.3 million at 2013-end. Total assets stood at $412.8 million at the end of Mar 2014, down from $441.6 million at 2013-end.

Meanwhile, long-term liabilities were $51.7 million, up from $49.6 million at 2013-end, although total shareholder equity rose to $286.7 million from $284.5 million at 2013-end. Consequently, operating cash flow decreased 7.3% year over year to $88.3 million at the end of Mar 2014.

Share Repurchase Update

CBOE Holdings repurchased 0.7 million shares for $37.1 million during the reported quarter. Moreover, shares worth $179.2 million have been purchased since the inception of the share buyback program in 2011.

On Dec 10, 2013, the board of CBOE Holdings sanctioned the repurchase of additional $100 million worth of common stock. Including shares remaining from the previous authorization, the company had about $120.8 million shares available for buybacks at the end of Mar 2014.

Guidance

Concurrently, CBOE Holdings reiterated its outlook for 2014. Core operating expense is projected to rise by 3-5% over 2013 to $191-196 million, primarily due to higher expenses from regulatory services. Depreciation and amortization expense should be within $38-40 million.

Continuing stock-based compensation expense, included in core expenses, is expected to be about $13 million in 2014. Meanwhile, effective tax rate is likely to be within 38.5-39.5%. Capital expenditure is projected in the band of $47-50 million, higher than $31.7 million in 2013.

Dividend Update

On Apr 29, 2014, the board of CBOE Holdings announced a regular quarterly dividend of 18 cents per share, which is payable on Jun 20, 2014, to shareholders of record on May 30.

On Mar 21, 2014, CBOE Holdings paid a regular quarterly dividend of 18 cents per share to shareholders of record as on Feb 28.

On Jan 17, 2014, the company paid a special dividend of 50 cents per share to shareholders of record on Jan 3.

Others

CBOE Holdings carries a Zacks Rank #3 (Hold) at present. However, some better-ranked financial stocks include Euronet Worldwide Inc. ( EEFT ), General Finance Corp. ( GFN ) and State Auto Financial Corp. ( STFC ), all of which sport a Zacks Rank #1 (Strong Buy).



CBOE HOLDINGS (CBOE): Free Stock Analysis Report

EURONET WORLDWD (EEFT): Free Stock Analysis Report

GENERAL FINANCE (GFN): Free Stock Analysis Report

STATE AUTO FINL (STFC): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: CBOE , EEFT , GFN , STFC

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

Most Active by Volume

44,823,339
  • $75.19 ▲ 0.28%
43,744,171
  • $3.44 ▼ 0.29%
42,340,022
  • $97.671 ▲ 0.66%
34,178,145
  • $17.62 ▼ 1.23%
34,028,998
  • $15.59 ▼ 0.19%
32,055,708
  • $21.23 ▼ 2.41%
31,539,235
  • $3.76 ▲ 0.80%
30,434,619
    $34.25 unch
As of 7/25/2014, 04:03 PM