Company Reports

Wide-moat-rated CME Group reported solid earnings that were in line with our expectations as the company benefits from strong futures trading volume, particularly for the firm’s energy and commodity futures. Revenue increased 3.2% from last year to $1.49 billion, while earnings per share fell to $2.35 from $2.43. The drop in earnings per share was entirely due to a decrease in nonoperating investment income. This was a stronger quarter than the year-over-year comparisons imply. The first quarter of 2023 benefited from the regional banking crisis, which caused a sharp temporary spike in interest rate futures trading. As we incorporate these results, we do not plan to materially alter our $225 fair value estimate for CME, and we see the shares as only slightly undervalued.

CME Group has enjoyed favorable market conditions in 2022 and 2023 as volatility across multiple asset classes drove increased trading volume, leading to strong revenue growth. Prior to 2022, the most significant headwind for the company had been the impact that low short-term interest rates had on its interest rate futures, which are its largest source of revenue. When interest rates are expected to stay low there is less need for interest rate hedging and less incentive for speculation, creating a drag on CME's trading volume. With interest rates now well above the 0% rate we saw during much of the past decade, the drag has been removed, benefiting the company's growth. That said, this was a one-time benefit, and we expect CME's revenue growth to return to the low to midsingle digits going forward, particularly as 2023 featured unusually large price increases from CME.

Wide-moat CME Group reported strong fourth-quarter results as volatile fixed-income markets drove higher volume for the firm’s interest-rate futures. Revenue increased 19% from last year and 7.6% from last quarter to $1.44 billion. Diluted earnings per share increased 23.4% from last year to $2.37. As we incorporate these results, we do not plan to materially alter our $220 fair value estimate. We see the shares as fairly valued.

CME Group has enjoyed favorable market conditions in 2022 and 2023 as volatility across multiple asset classes drove increased trading volume, leading to strong revenue growth. Prior to 2022, the most significant headwind for the company had been the impact that low short-term interest rates had on its interest rate futures, which are its largest source of revenue. When interest rates are expected to stay low there is less need for interest rate hedging and less incentive for speculation, creating a drag on CME's trading volume. With interest rates now well above the 0% rate we saw during much of the past decade, the drag has been removed, benefiting the company's growth. That said, this was a one-time benefit, and we expect CME's revenue growth to return to the low to midsingle digits going forward, particularly as 2023 featured unusually large price increases from CME.

Wide-moat-rated CME group reported solid earnings that were in line with our expectations as the company benefited from strong trading volume in its commodity futures. CME’s net revenue increased 9% from last year but decreased 1.6% from a strong second quarter to $1.34 billion. Meanwhile, the company’s earnings per share increased 10.2% to $2.06. As we incorporate these results, we do not plan to materially alter our $215 fair value estimate, and we see shares as roughly fairly valued.

Wide-moat-rated CME Group reported strong second-quarter results as high trading volume in commodity futures more than offset a decrease in equity futures trading. Net revenue increased 10% from last year to $1.36 billion, while net income increased 17.4% to $777 million. CME’s performance in the first half of 2023 has been impressive, but we generally advise against placing too much weight on any individual quarter’s results. CME’s revenue is primarily transactional, and volume can significantly vary from quarter to quarter based on market conditions. As we incorporate these results, we do not plan to materially alter our $215 fair value estimate. We see the shares as only modestly undervalued.

After two years of disappointing revenue growth, CME Group has enjoyed far more favorable market conditions in 2022 and early 2023 as volatility across multiple asset classes drives increased trading volume. In recent years, the most significant headwind for the company has been the impact that low short-term interest rates had on its interest rate complex, which is its largest source of revenue. When interest rates are expected to stay low there is less need for interest rate hedging and less incentive for speculation, creating a drag on CME's trading volume. With interest rates now well above the 0% rate we saw during much of the past decade, the drag has been removed, benefiting the company's growth.

Wide-moat-rated CME Group reported strong first-quarter earnings as significant volatility, particularly in interest rate markets, drove high trading revenue. Net revenue increased 7% year over year and 19.4% sequentially to $1.44 billion, while earnings per share increased 24.6% from last year to $2.43. As we incorporate these results, we do not expect to materially alter our $215 fair value estimate for CME, and we view the shares as modestly undervalued.

After two years of disappointing revenue growth, CME Group enjoyed far more favorable market conditions in 2022 as volatility across multiple asset classes drives increased trading volume. In recent years, the most significant headwind for the company has been the impact that low short-term interest rates had on its interest rate complex, which is its largest source of revenue. When interest rates are expected to stay low there is less need for interest rate hedging and less incentive for speculation, creating a drag on CME's trading volume. With interest rates now well above the 0% rate we saw during much of the past decade, the drag has been removed, benefiting the company's growth.

Wide-moat-rated CME Group reported solid fourth-quarter results that were largely in line with our expectations, driven by strength in the company's equity index and foreign-exchange futures. Net revenue increased 5.3% year over year but fell 1.6% sequentially to $1.21 billion. Diluted earnings per share rose 2.3% from the prior-year period to $1.75. As we incorporate these results, we do not plan to materially alter our $215 fair value estimate. We view the shares as modestly undervalued at current prices.

The North American exchanges have undergone substantial changes in recent years, as regulatory changes, sharp shifts in market conditions, and Intercontinental Exchange and Nasdaq’s continued efforts to reposition their firms as diversified technology companies have kept the group in flux. The exchanges have enjoyed substantial tailwinds over the last couple of years as their core trading and listing operations benefited from cyclical highs in equity market volatility and IPO activity, with futures and options volume far above prepandemic levels. We do expect these tailwinds to fade and project more normalized rates of growth going forward, but, in our view, recent market activity has left shares of some exchanges oversold and we see opportunity for investors in the industry group.

After two years of disappointing revenue growth, CME Group is enjoying far more favorable market conditions in 2022 as volatility across multiple asset classes drives increased trading volume. In recent years, the most significant headwind for the company has been the impact that low short-term interest rates had on its interest rate complex, which is its largest source of revenue. When interest rates are expected to stay low there is less need for interest rate hedging and less incentive for speculation, creating a drag on CME's trading volume. With interest rates rising in 2022, this drag has been removed, benefiting the company's growth.

Wide-moat CME group reported solid third-quarter earnings that were broadly in line with our expectations as it continues to benefit from volatile markets in 2022. Revenue increased 10.6% from last year to $1.23 billion, though was effectively flat sequentially. Net income fell from $926.5 million last year to $679.6 million as the company laps a $430 million one-time gain during last year’s quarter. As we incorporate these results, we do not expect to make any material changes to our $220 fair value estimate for CME.

After two years of disappointing revenue growth, CME Group is enjoying far more favorable market conditions in 2022 as volatility across multiple asset classes drives increased trading volume. In recent years, the most significant headwind for the company has been the impact that low short-term interest rates had on its interest rate complex, which is its largest source of revenue. When interest rates are expected to stay low there is less need for interest rate hedging and less incentive for speculation, creating a drag on CME's trading volume. With interest rates rising in 2022, this drag has been removed, benefiting the company's growth.

Wide-moat-rated CME Group reported strong second-quarter earnings as the company continues to benefit from volatile market conditions, which drove significantly higher trading volume in the firm's equity, interest rate, and foreign exchange futures contracts. CME reported second-quarter revenue of $1.24 billion, which was up 4.9% year over year, or more than 11% when adjusted for the formation of its OSTTRA joint venture with S&P Global. Earnings per share of $1.82 were 28% higher than the prior year's period, as CME benefited from higher revenue and strong cost management. As we incorporate these results, we do not plan to make a material change to our $212 per share fair value estimate for CME.

CME has suffered from little to no revenue growth more recently as all its futures complexes reported lower trading volume in 2021 than in 2019, with the notable exception being its equity futures platform, which remains well above prepandemic levels. The most significant headwind for the company has been the impact that low short-term interest rates has had on its interest rate complex, which is its largest source of revenue. When interest rates are expected to stay low there is less need for interest rate hedging and less incentive for speculation, creating a drag on CME's trading volume. With interest rates now rising, though, this drag has been removed and the company's results have improved so far in 2022. After a couple years of meager revenue growth, we see CME enjoying more favorable market conditions in the near term.

Wide-moat CME Group reported strong first-quarter earnings that were in line with our expectations as market volatility in multiple asset classes drove higher trading volume for the firm’s futures contracts. CME’s revenue increased 7.4% from last year to $1.35 billion, while earnings per share of $1.95 were up 22% year over year and 14% sequentially. These strong results aside, CME’s performance can vary substantially from quarter to quarter as its revenue is primarily driven by transaction fees, leaving the firm exposed to the ebb and flow of market volatility. As a result, these strong results do not materially alter our thesis for CME Group, and we are maintaining our $210 fair value estimate.

While CME’s top and bottom lines remained stable during 2020, trading volume for the company’s various lines of futures products saw significant fluctuations. The most significant headwind for the company in recent years has been the impact low short-term interest rates has had on its interest rate complex, which is its largest source of revenue. When interest rates are expected to stay low there is less need for interest rate hedging and less incentive for speculation, creating a drag on CME’s trading volume. However, with interest rates now rising this drag has been removed and we expect the company to enjoy a recovery in trading volume at its interest rate futures complex. After a couple years of meager revenue growth, CME is well positioned for 2022 with market conditions becoming more favorable for the company.

Wide-moat CME Group reported solid fourth-quarter earnings that were largely in line with our expectations as it benefits from the return of interest rate volatility. Net income grew 22.2% year over year, albeit from a weak fourth-quarter 2021, and rose 3.7% sequentially to $595.7 million. Revenue rose 4.4% year over year to $1.15 billion but was up 11% once adjusted for the creation of a post-trade services joint venture with IHS Markit. As we incorporate these results, we are raising our fair value estimate for CME to $213 from $190. Roughly $10 of the increase comes from us no longer projecting a tax rate increase for CME, around $5 comes from earnings since out last update, and the remainder of the increase comes higher expectations for CME’s interest rate and equity futures complexes as these businesses benefited from heightened volatility.

While CME’s top and bottom lines remained stable during 2020, trading volume for the company’s various lines of futures products saw significant fluctuations. The most significant headwind for the company in recent years has been the impact low short-term interest rates has had on its interest rate complex, which is its largest source of revenue. When interest rates are expected to stay low there is less need for interest rate hedging and less incentive for speculation, creating a drag on CME’s trading volume. However, with interest rates now rising this drag has been removed and we expect the company to enjoy a recovery in trading volume at its interest rate futures complex. After a couple years of meager revenue growth, CME is well positioned for 2022 with market conditions becoming more favorable for the company.