Deutsche Boerse Achieves 2023 Targets a Year Early on Good Secular and Strong Cyclical Growth

Wide-moat Deutsche Boerse closed off a strong 2022 with fourth-quarter earnings per share of EUR 1.96 versus EUR 1.83 consensus estimates collected by the exchange group prior to the release. Higher activity and volatility throughout the year had been a boon for Deutsche Boerse and continued to buoy revenue in the last quarter of the year, as well. Net revenue increased 25% to EUR 1.168 billion in the quarter versus the same period a year ago. Strong demand for ESG and index data and a strong performance in commodities trading stood out in an overall strong quarter for the group. Higher interest rates on cash balances was the largest driver of performance in the quarter, however. Net interest income came in at EUR 138.9 million versus just EUR 13.8 million last year, reflecting higher interest rates in the U.S. and Europe. With interest rates unlikely to resume close to zero levels in the medium term, the interest income benefit to Deutsche Boerse’s bottom line will prove more structural. Thanks to the slightly ahead-of-target secular growth and strong cyclical tailwinds, Deutsche Boerse even achieved its 2023 goals on net revenue and EBITDA a year early. However, going into 2023, the strong cyclical tailwind the group experienced through last year should ebb and pose a higher hurdle for strong outperformance this year. That said, we plan to update our model with these results shortly, which is likely to increase our fair value estimate by about 10%.