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CME Group Posts Weak Earnings on High Expense - Analyst Blog
CME Group Inc. ( CME ) reported fourth-quarter 2013 operating earnings per share of 64 cents. Results missed the Zacks Consensus Estimate of 67 cents but beat the year-ago quarter figure by a penny.
Consequently, operating net income inched up 1.9% year over year to $214.3 million. Including extraordinary items, GAAP net income stood at $193.1 million or 58 cents a share in the reported quarter against $166.8 million or 50 cents per share in the year-ago period.
CME Group's total revenue climbed 3.9% year over year to $687 million and also exceeded the Zacks Consensus Estimate of $685 million. Growth primarily resulted from an accretion in clearing and transaction fees due to incremental volumes within interest rate, energy and agricultural commodities. However, lower average rate per contract as well as deteriorated revenues from market data and information services along with access and communication fees partially offset the upside.
CME Group's average daily volume jumped 11.2% year over year to 11.33 million contracts in the reported quarter, primarily driven by a surge of 29% in volumes from interest rate products. However, total average rate per contract reduced 6.1% from the year-ago quarter to 78.0 cents. Nonetheless, the volumes constitute mostly of lower-priced products across asset-class that require higher volume discounts.
CME Group's clearing and transaction fees rose 5.9% year over year to $576.8 million, accounting for about 84% of the total revenue. However, revenues from market data and information services decreased 3.5% to $76.5 million. Additionally, revenues from access and communication fee decelerated 10.7% year over year to $20.9 million, whereas other revenues reduced 5.8% year over year to $12.9 million.
Meanwhile, total operating expenses inflated 27.5% year over year to $363.8 million. Consequently, operating income declined 14% to $323.2 million, significantly deteriorating operating margin to 33.8% from 56.8% in the year-ago quarter.
However, CME Group recorded non-operating expenses of $16.2 million against $22.1 million in the year-ago quarter, primarily owing to higher investment income and lower borrowing costs in the reported quarter.
Highlights of Full-Year 2013
For full-year 2013, CME Group reported operating earnings of $3.05 per share, which missed the Zacks Consensus Estimate of $3.09 but surpassed $3.02 recorded per share in 2012.Reported net income stood at $976.8 million or $2.92 per share in 2013 against $896.3 million or $2.70 per share recorded in 2012.
Total revenue edged up 0.7% year over year to $2.94 billion in 2013, which also whiskered past the Zacks Consensus Estimate of $2.92 billion. Total operating expenses grew 6.3% year over year to $1.3 billion, slightly higher than management's target of below 5% growth.
As of Dec 31, 2013, CME Group had $2.54 billion of cash and marketable securities, higher than $1.66 billion at 2012-end, while long-term debt stood at $2.1 billion, at par with the 2012-end level.
As of Dec 31, 2013, CME Group had total assets of $54.28 billion (up from $38.86 billion as of Dec 31, 2012), while total equity stood at $21.16 billion (down from $21.42 billion as of Dec 31, 2012). The company did not repurchase shares during the reported quarter.
On Dec 11, 2013, the board of CME Group declared an annual variable dividend of $2.60 per share, which was paid on Jan 14, 2014, to shareholders of record as on Dec 27, 2013.
The dividend was worth more than $872 million, significantly higher than about $199 million of variable dividend paid for the first time in 2012. Including the regular dividends, a total of about $2.7 billion was paid in dividends since the beginning of 2012.
On Dec 26, 2013, CME Group paid a regular dividend of 45 cents per share for the fourth quarter to shareholders of record as on Dec 10.
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