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Will Solid Volume Growth Aid CME Group (CME) Q4 Earnings?

We expect CME Group Inc.CME to beat earnings expectations when it reports its fourth-quarter and full-year 2016 results, on Feb 2, before the markets open.

Why a Likely Positive Surprise?

Our proven model shows that CME Group has the right combination of the two key ingredients to beat earnings.

Positive Zacks ESP : Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is pegged at +1.85%. This is a major indicator of a likely positive earnings surprise for the company.

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : CME Group carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 and 3 (Hold) have a significantly higher chance of beating earnings.

The combination of CME Group's Zacks Rank #2 and ESP of +1.85% makes us confident of an earnings beat on Feb 2. Notably, the Zacks Consensus Estimate of $1.08 reflects a year-over-year increase of 17.2%.

Factors to Influence Q4 Results

CME Group's quarterly results are likely to get support from improved average daily volume (ADV). Amid increased volatility driven by the U.S. presidential election and the December Fed rate hike, the company's ADV for fourth-quarter 2016 surged 24% year over year to 16.3-million contracts, with growth across five of the six product lines.

Metals volume averaged 488,000 contracts per day in the quarter, up 49% year over year. Interest rate volume averaged 8.3 million contracts, up 36% year over year.

Energy volume jumped 27% from the prior-year quarter and averaged 2.6 million contracts per day in fourth-quarter 2016. Foreign exchange volume averaged 883,000 contracts per day, rising 13% year over year.

Equity index volume averaged 2.7 million contracts per day in the quarter, up 10% year over year. However, agricultural volume averaged 1.2 million contracts per day, down 1% from the year-ago quarter.

For full-year 2016, options volume averaged 3.1 million contracts per day, up 14%, with electronic options averaging a record 1.7 million contracts per day, up 21% year over year.

The top line should also benefit from the Chicago, IL-based company's consistent efforts to expand and cross sell its core exchange-traded business through strategic alliances, new product initiatives and global reach.

However, higher expenses are likely to keep the bottom line under pressure. New retail advertising campaign is expected to impact results in the to-be-reported quarter. Also, management projected higher pro fees based on certain growth oriented projects.

Notably, CME Group has a decent earnings surprise history, with an average beat of 1.5% for the trailing four quarters.

CME Group Inc. Price and EPS Surprise

CME Group Inc. Price and EPS Surprise | CME Group Inc. Quote

Stocks That Warrant a Look

Here are some stocks worth considering, as they have the right combination of elements to post an earnings beat this quarter.

MasterCard Inc. MA is scheduled to release results on Jan 31. It has an Earnings ESP of +3.53% and carries a Zacks Rank #3.

Nasdaq, Inc. NDAQ is scheduled to release results on Jan 31. It has an Earnings ESP of +1.06% and carries a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

CBOE Holdings, Inc. CBOE has an Earnings ESP of +3.45% and sports a Zacks Rank #1. The company is slated to release results on Feb 6.

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CME Group Inc. (CME): Free Stock Analysis Report

Nasdaq, Inc. (NDAQ): Free Stock Analysis Report

CBOE Holdings, Inc. (CBOE): Free Stock Analysis Report

Mastercard Incorporated (MA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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