On Feb 20, the Zacks Investment Research downgraded
CME Group Inc.
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
CME Group has witnessed sharp downward estimate revisions
after reporting disappointing fourth-quarter and full-year 2012
results. Shares of this derivative exchange are likely to
continue fluctuating given the absence of any major growth
catalyst in the near future.
On Feb 5, CME Group reported fourth-quarter 2012 operating
earnings per share of 63 cents, which was in line with the Zacks
Consensus Estimate. However, it significantly lagged the year-ago
quarter's earnings of 71 cents.
The year-over-year decline was attributable to a 10.3% decline
in total revenue, partially offset by a 10% dip in operating
expenses. CME Group's fees from clearing and transaction
services, which accounts for about 84% of the total revenue, have
been consistently deteriorating as a result of poor average daily
volumes across asset classes.
While liquidity remains modest, poor financial results have
deterred the company to repurchase shares. This further raises
caution among investors. Although CME Group is straining to
control expenses, the overall weak trading activity, lower
volumes along with currency and interest rate fluctuations amid
intense competition only heighten uncertainty in the near
The Zacks Consensus Estimate for 2013 decreased 3.2% to $3.14
per share over the last 30 days, with 10 out of the 16 estimates
being revised downward. For 2014, 7 of 14 estimates were revised
downward, over the last 30 days, sinking the Zacks Consensus
Estimate by 2.8% to $3.59 per share. No upward revisions have
been witnessed for both the years.
Other Stocks to Consider
While most stock exchanges are bearing the brunt of weak
volumes, though not as severe as CME Group, there are some strong
performers in the financial sector, which include
XL Group Plc
Employers Holdings Inc.
Bank of Montreal
). All of these carry a Zacks Rank #1 (Strong Buy).
BANK MONTREAL (BMO): Free Stock Analysis
CME GROUP INC (CME): Free Stock Analysis
EMPLOYERS HLDGS (EIG): Free Stock Analysis
XL GROUP PLC (XL): Free Stock Analysis Report
To read this article on Zacks.com click here.