On Dec 7, Zacks Investment Research downgraded
CBOE Holdings Inc.
) to a Zacks Rank #3 (Hold) from a Zacks Rank #2 (Buy).
Why the Downgrade?
Earnings estimates for CBOE have not witnessed any momentum
owing to mixed third-quarter 2013 results and slightly weak
volumes in Nov 2013. However, this derivative exchange operator
outperformed the 3-month Nasdaq index, which posted growth of
8.4% against 1.4% clocked by CBOE.
On Nov 1, CBOE reported third-quarter operating earnings per
share of 47 cents. Results modestly surpassed the year-ago
quarter earnings of 43 cents and the Zacks Consensus Estimate of
45 cents. However, total operating revenues missed the Zacks
Consensus Estimate by 1%.
CBOE's top line continues to be adversely affected by
moderation in transaction fee revenue, lower average revenue per
contract and a high tax rate. Nonetheless, reduced expenses and
improved regulatory and service fees boosted margins during the
Additionally, average daily volumes stood slightly lower in
the first nine months of 2013. While improvement was witnessed in
Oct 2013, volumes again underperformed in Nov 2013, reflecting
Following the earnings release, the Zacks Consensus Estimate
for 2013 edged up by a penny to $1.98 per share in the last 60
days. Meanwhile, the Most Accurate estimate for CBOE's 2014
earnings stands at $1.97 a share, resulting in an
of -0.5%. Simultaneously, the estimate for 2014 inched up 2 cents
to $2.30 a share in the last 60 days.
CBOE's growth appears to be stagnating due to the absence of
any fundamental growth catalyst amid the intensely competitive
environment. The acquisition of NYSE Euronext Inc. by
IntercontinentalExchange Group Inc.
) last month also puts additional pressure on CBOE's market
retention and operating leverage.
Other Insurers Worth a Look
We prefer to remain on the sidelines regarding CBOE for the
time being. However, investors interested in the financial sector
may consider stocks like IntercontinentalExchange,
Nasdaq OMX Group Inc.
). All these stocks carry a Zacks Rank #2.
CBOE HOLDINGS (CBOE): Free Stock Analysis
CIGNA CORP (CI): Free Stock Analysis Report
INTERCONTNTLEXC (ICE): Free Stock Analysis
NASDAQ OMX GRP (NDAQ): Free Stock Analysis
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