Shares of CME Group Inc.CME jumped 33.8% in a year's time, outperforming the 23.5% growth for the Zacks categorized Securities Exchanges industry. We see potential upside for the stock in the near term, given the company's strength in several areas.
Based in Chicago, IL, CME Group is a major and most diverse derivatives marketplace. It offers a broad range of products, covering major asset classes, based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities and metals. Trades can be executed through the company's electronic trading platforms or open outcry.
Why is the Stock an Attractive Pick?
Improving Volumes to Support Revenue : In recent years, CME Group has managed to register decent growth in its clearing and transaction fees, which constitutes over 80% of the company's total revenues. The increase in the fees has been primarily driven by rising volumes. Notably, amid increased volatility driven by the U.S. presidential election and the December Fed rate hike, CME Group's average daily volume (ADV) for fourth-quarter 2016 surged 24% year over year to 16.3-million contracts, with growth across five of the six product lines.
Earnings per Share Growth : CME Group has witnessed more than 12% rise in earnings per share in the last three years. It remains well positioned for growth on the back of its strong market position with diverse derivative product lines. Efforts to expand and cross sell its core exchange-traded business through strategic alliances & acquisitions, new product initiatives and global reach should further support its earnings momentum. Notably, the company has long-term expected earnings per share (EPS) growth rate of 9.9%.
Steady Capital Deployment Activities : Driven by financial strength, CME Group remains committed to boost shareholder's value. Last December, the company announced annual variable dividend of $3.25 per share, totaling about $1.1 billion. CME Group pays five dividends per year, with the fifth being variable which is based on excess cash flow in the year. Since it commenced the annual variable dividend structure in 2012, CME Group's return to shareholders amounted to more than $7.5 billion in quarterly and variable dividends.
Upward Estimates Revisions : CME Group has been witnessing upward estimate revisions, ahead of its fourth-quarter 2016 results. Over the past 30 days, the Zacks Consensus Estimate for the quarter advanced 9.1% to $1.08. Also, for 2016, it inched up 1.6% to $4.45. The positive earnings estimate revisions indicate analysts' confidence and substantiate the Zacks Rank #2 (Buy) for the stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Other Stocks to Consider
CBOE Holdings, Inc. CBOE : Over the last 30 days, the Zacks Consensus Estimate for fourth-quarter 2016 increased 3.5% to 59 cents per share and climbed nearly 1% to $2.938 for 2016. The company carries a Zacks Rank #2.
The PNC Financial Services Group, Inc. PNC : The Zacks Consensus Estimate for fourth-quarter 2016 climbed 1.6% to $1.86, over the past 30 days. In addition, it moved up slightly to $7.18 for 2016. The company also carries a Zacks Rank #2.
Cullen/Frost Bankers, Inc. CFR : Over the past 30 days, the Zacks Consensus Estimate for fourth-quarter 2016 advanced 1% to $1.24 and slightly moved up to $4.64 for 2016. The company has a Zacks Rank #2 (Buy).
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