CME Group Inc.
) reported third-quarter 2012 operating earnings per share of 70
cents, breezing past the Zacks Consensus Estimate by a penny but
significantly lagging behind the year-ago quarter's earnings of
Operating net income plunged 26.1% year over year to $233.7
million. This excluded the tax provision worth $16 million
associated with escalations in deferred income tax liabilities
related to S&P Dow Jones Indices and the company's
acquisition of Pivot Inc.
Including these adjustments, the quarterly GAAP net income was
$218.0 million or 66 cents per share. However, no such
extraordinary items were recorded in the year-ago quarter.
CME Group's total revenue for the reported quarter nosedived
21.8% year over year to $683.2 million. It also fell shy of the
Zacks Consensus Estimate of $685 million. The significant drop
was primarily due to a momentous decline in clearing and
transaction fees as a result of lower or poor average daily
volumes across interest rates, equities, foreign exchange, energy
and metals asset classes. These were marginally offset by stable
average rate per contract.
CME Group's average daily volume plummeted 26% year over year
to 10.8 million contracts in the reported quarter. However, total
average rate per contract climbed 6% from the year-ago quarter to
82.2 cents. The volumes constituted mostly of lower-priced
products across asset-class that require higher volume
clearing and transaction fees
decreased 23.2% year over year to $562.2 million, while
accounting for 82% of the total revenue. Additionally, revenue
and information services
decelerated 22.6% year over year to $82.8 million. However,
revenue earned from
access and communication fee
surged 93.3% year over year to $23.2 million, while
revenues plunged 33.3% year over year to $15.0 million.
However, total operating expenses dipped 4.9% year over year
to $287.2 million. However, excluding non-recurring items,
operating expenses were flat year over year to $302.9 million,
which is within management's projection. Operating income fell
30.8% year over year to $396.0 million. Subsequently, operating
margin slashed to 58.0% from 65.4% in the year-ago quarter.
Meanwhile, CME Group recorded a non-operating expense of $0.2
million against $26.2 million in the year-ago quarter, primarily
owing to higher interest and borrowing costs.
As of September 30, 2012, CME Group had $2.1 billion of cash
and marketable securities, higher than $1.1 billion at 2011-end,
while long-term debt stood at $2.106 billion, in line with the
As of September 30, 2012, CME Group had total assets of $39.86
billion (down from $40.76 billion as of December 31, 2011) while
total shareholders' equity stood at $21.71 billion (up from
$21.55 billion as of December 31, 2011). The company did not
repurchase shares during the reported quarter.
In April 2012, management had projected the effective tax rate
to be 41% for the remaining quarters of 2012. Previously, CME
Group had also disclosed its aim of maintaining expense growth
below 5% for 2012 and beyond.
On August 24, 2012, the board of CME Group declared a regular
third-quarter dividend of 45 cents per share, which was paid on
September 25, 2012, to shareholders of record as on September 10,
2012. The dividend reflects the effect of 5-for-1 stock split of
its common stock.
On May 24, 2012, the board of CME Group announced a 5-for-1
common stock split, in the form of a 400% stock dividend. The
dividend was paid on July 20, 2012, to shareholders of record as
on July 10, 2012.
NASDAQ OMX Group Inc.
) reported its third quarter operating earnings per share of 62
cents, which surpassed the Zacks Consensus Estimate by a couple
of cents. However, it fell shy of the prior-year quarter's
earnings of 67 cents by a nickel, based on weak volumes across
businesses. Meanwhile, CME Group's another prime peer -
NYSE Euronext Inc.
) is scheduled to release its results before the market opens on
November 6, 2012.
Currently, CME carries a Zacks Rank #4, which translates into
a short-term Sell rating, while the long-term recommendation
CME GROUP INC (CME): Free Stock Analysis
NASDAQ OMX GRP (NDAQ): Free Stock Analysis
NYSE EURONEXT (NYX): Free Stock Analysis
To read this article on Zacks.com click here.