Company Reports

Deutsche Boerse reported first-quarter EPS of EUR 2.70, up 5% versus the same period last year and consensus estimates of EUR 2.56 per share collected by the exchange group prior to the release. Revenue grew 6% organically, if we exclude the contribution of the SimCorp acquisition. Net interest income continued to boost Deutsche Boerse’s fund services and securities services segment, carried by higher interest rates than in the year-ago period and only marginally smaller cash balances. Derivatives trading showed a mixed quarter due to divergent volatility backdrops. Compared with the heightened uncertainty surrounding the banking stress in the US and consolidation of the Swiss banking market at the beginning of last year, equity derivatives declined 21% as volatility returned toward its long-term average. Fixed income remained flat, aided by the anticipation of potential rate cuts. On the other hand, commodities enjoyed greater volume as power prices declined, lifting revenue by 18% in this subsegment. Operating expenses increased 4%, again after excluding SimCorp, which is a good development considering the exchange group is currently investing in cost synergies and therefore front-loading expenses. We maintain our EUR 201 per-share fair value estimate and wide moat rating.

Deutsche Boerse reported a good set of fourth-quarter results. In the spotlight were the better-than-expected contributions from Simcorp, which Deutsche Boerse added to its roster of data-related businesses in the fourth quarter. Other businesses performed largely within our expectations, as DB continued to benefit from both structural and cyclical tailwinds. A storyline that we saw throughout the year and which also shone again in the fourth quarter was the impact of higher interest rates on the business. While only marginally lower, higher net interest income, lower cash balances, and increased demand for interest-rate derivatives proved to be a boon for Deutsche Boerse again. Revenue for the group grew 17% to EUR 1,437 million in the quarter, which translates to 5% organic growth if excluding the impact of the Simcorp addition. EBITDA grew 23%, or 13% organically. We maintain our wide economic moat rating but raise our fair value estimate to EUR 201 per share from EUR 180 after updating our model with 2023 figures.

Deutsche Boerse has a compelling suite of services, making it one of the dominant exchange groups in Europe. It operates a derivative trading and clearing business, a leading international central securities depository, or ICSD, a leading fund distribution platform, exchanges in cash equities, commodities and foreign exchange, and an index and analytics business.

Wide-moat Deutsche Boerse reported a decent third quarter with net revenue growing to EUR 1.18 billion (up 9%) and EBTIDA of EUR 685 million (up 13%) excluding one-offs. The group continues to enjoy solid structural growth dynamics in the analytics and index business, while cyclical tailwinds remain a positive contributor to the top line. That said, cyclical drivers are starting to become more mixed with volatility and interest rates having peaked or about to do so. We maintain our EUR 180 per-share fair value estimate.

Wide-moat Deutsche Boerse reported second-quarter EBITDA of EUR 733 million, up 25% compared with the same period a year ago and ahead of the EUR 703 million expected by the consensus collected by Deutsche Boerse. We maintain our EUR 180 per share fair value estimate.

Wide-moat Deutsche Boerse reported a decent first quarter buoyed by rising interest rates and higher market volatility surrounding the banking crisis in the U.S. and Europe. Net revenue increased 16% to EUR 1.231 billion, of which 7% was booked on structural growth in over-the-counter clearing of financial derivatives, ESG products, and market share gains in commodities and foreign exchange. The remaining 9% of revenue growth was owed to rising interest rates increasing interest earned on cash held in the clearing and settlement business as well as higher volumes of equity index derivatives benefiting the trading and clearing segment due to the short-term increase in volatility surrounding the banking crisis. Operating costs of EUR 453 million, up 11%, were pushed up higher primarily due to inflationary impacts, as was largely expected. With the cyclical tailwinds set to continue, especially higher interest rates contributing materially to higher interest earned, Deutsche Boerse is likely to hit the upper range of its guidance of EUR 4.7 billion in revenue and EUR 2.8 billion EBITDA. We plan to update our model shortly.

Wide-moat Deutsche Boerse announced its intention to acquire Simcorp, the publicly listed investment management software provider, for an equity value of EUR 3.9 billion. The deal makes strategic sense as it plugs a hole in Deutsche Boerse's data and analytics business. Simcorp adds portfolio management, trading and execution, portfolio accounting, and post-trade operations, as well as risk management to Deutsche Boerse's suite of products, which had been primarily focused on portfolio design and monitoring solutions up until now. The deal looks to be on the expensive side, however. We plan to update our model shortly, which we believe is likely to result in a change to our EUR 180 fair value estimate within a 10% range. Our wide-moat rating is unchanged.

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%.

Wide-moat Deutsche Boerse reported a good third quarter, with EBITDA of EUR 642 million compared with the EUR 590 million consensus estimates as collected by the group itself. Performance across all segments was good, driving 8% secular growth at the revenue line, while continued high demand for hedging products owing to interest-rate changes and uncertainty in energy markets resulted in cyclical growth of 20%. Given this strong cyclical momentum, management lifted guidance to above EUR 4.1 billion in net revenue and above EUR 2.3 billion in EBITDA for 2022. We maintain our fair value estimate of EUR 180 per share.

Increased volatility and higher trading activity were again a boon for wide-moat Deutsche Boerse in the second quarter. Since the beginning of 2022, the exchange group has been a beneficiary of the greater uncertainty across all asset classes, as well as of the heightened demand for hedging trades. Net revenue of EUR 1,018 million and EBITDA of EUR 585 million grew 15% and 13%, respectively, versus the same quarter a year ago, comfortably beating consensus estimates of EUR 972 million and EUR 561 million. Crucially, structural growth drivers such as higher demand for its data and analytics offering and new environmental, social, and governance customers contributed 8% of the total 15% revenue growth in the quarter. We retain our EUR 180 fair value estimate.

Deutsche Boerse has a compelling suite of services, making it one of the dominant exchange groups in Europe. It operates a derivative trading and clearing business, a leading ICSD, a leading fund distribution platform, exchanges in cash equities, commodities and foreign exchange, and an index and analytics business.

Higher trading activity in volatile markets has driven a strong start to the year for Deutsche Boerse. The wide-moat exchange group reported net revenue of EUR 1,062 million in the first quarter, up 24% compared with the same period a year ago. EBITDA came in at EUR 687 million, 6% ahead of consensus estimates pulled by Deutsche Boerse. On the basis of such good results, Deutsche Boerse now believes it can outperform its previous full-year guidance of EUR 3.8 billion in net revenue and EUR 2.2 billion EBITDA. We anticipate a marginal increase in our current EUR 168 per-share fair value estimate when we publish our updated model shortly.

Wide-moat Deutsche Boerse reported earnings per share for full-year 2021 of EUR 6.59, 4% ahead of our estimates. Net revenue increased 9% to EUR 3,510 million, a good performance given the normalization of trading activity in 2021 and difficult comparable base of 2020. The slowdown was felt primarily in Eurex (down 10%) and Xetra (down 7%), which declined from a strong 2020 as was to be expected. As measured by the VSTOXX Index, activity declined about 31% from elevated levels in 2020, putting net revenue declines at Eurex and Xetra into a more positive light. Other good takeaways in the year were strong growth at EEX (up 13%) and investment fund services (up 64%) with the former benefitting from higher commodities trading activity in the fourth quarter, adding to what already shaped up to be a good year for the segment. The Investment fund services business is expected to remain a growth driver for Deutsche Boerse in future; we model 15% revenue CAGR over the next five years. EBITDA rose 9% to EUR 2,043 million, putting the group well on track to meet its 2023 targets. Operating expenses increased 13% to EUR 1,552 million, albeit entirely owed to recent acquisitions adding to the cost base. On an organic basis, costs were flat. Revenue and EBITDA guidance for 2022 of about EUR 3,800 million and EUR 2,200 million is in line with our assumptions in our latest model. We maintain our fair value estimate of EUR 168 per share.

Deutsche Boerse, or DB, has a compelling suite of services, making it one of the dominant exchange groups in Europe. It operates a derivative trading and clearing business, a leading ICSD, a leading fund distribution platform, exchanges in cash equities, commodities and foreign exchange, and an index and analytics business.

Wide-moat Deutsche Boerse keeps delivering on its 2023 growth ambitions. Third-quarter revenue came in at EUR 838 million, up 18% versus last year, while EBITDA grew 25% to EUR 500 million. Performance by segment was mixed, owing to Deutsche Boerse’s diversified structure, but overall positive. We maintain our fair value estimate of EUR 150 per share and wide moat rating.

London Stock Exchange Group has announced the closure of its derivatives trading segment, CurveGlobal. In 2016, LSEG launched the joint venture with seven investment banks and CBOE in an effort to challenge Deutsche Boerse’s and Intercontinental Exchange’s dominance in the European fixed-income derivatives market. We maintain our fair value estimates for LSEG and Deutsche Boerse of GBX 9,200 per share and EUR 150 per share, respectively. Our wide moat ratings for both exchange groups are also unchanged.

We maintain our EUR 150 per share fair value estimate for wide-moat Deutsche Boerse after it reported a decent set of results. Net revenue grew 4% on an organic basis, while operating costs declined 2%. Overall, we think this performance is decent given the cyclical headwinds the group was expected to face in the first half of this year. Lower volatility impacted most of its trading-related businesses in Eurex, Xetra, and 360T, while low interest rates were anticipated to pose a drag on net treasury income at Clearstream. The exchange group is on track meeting its 2019 to 2023 10% average annual growth targets in both revenue and EBITDA.

We maintain our EUR 150 per-share fair value estimate and wide moat rating for Deutsche Boerse after the group released a limited set of first-quarter results for 2021. As was to be expected, revenue declined sharply across the board compared with the same period a year ago, when market volatility and volumes spiked due to the onset of the coronavirus. At group level, revenue shrank 7%. However, if we compare top-line performance with levels in the same period of 2019, the continued strong performance becomes more evident. Excluding the newly acquired ISS business, we estimate Deutsche Boerse grew its revenue by close to 8% per year. At the same time, EBITDA grew 7%. Overall, this performance is well in line with its long-term strategic target of growing revenue and EBITDA at a 10% annual rate, which includes additional acquisitions, until 2023.

Wide-moat Deutsche Boerse reported full-year net income of EUR 1.2 billion, ahead of the EUR 1.1 billion we had expected. We maintain our fair value estimate of EUR 150 per share. Performance through the year was in line with guidance, although volatile markets had mixed effects on Deutsche Boerse’s business segments. High market activity has been a boon for equity index derivative-related revenue, up 12% versus the prior year, supporting a good year in the trading and clearing segment Eurex. Over-the-counter, or OTC, clearing benefited from the uncertainty around the U.K. obtaining equivalency from the European Union. Deutsche Boerse now captures 20% of OTC euro-denominated interest swaps. The increased trading activity also lifted revenue in the cash equities business, with trading and clearing up 34% and data up 13%. On the other hand, lower interest rates in the U.S. have slashed net interest income from EUR 188 million to EUR 101 million in Deutsche Boerse’s Clearstream business. This was partially offset by higher custody and settlement revenue. The remaining segments showed a good performance with the commodity business growing the top line 4% and the foreign-exchange business 10%. Its index and analytics business, one of its core growth drivers, showed a 7% revenue increase on an organic basis. In sum, net revenue grew by 9% and EBITDA by 12% to EUR 1.9 billion. Management communicated guidance for next year for net revenue of EUR 3.5 billion and EBITDA of EUR 2 billion.

Wide-moat Deutsche Boerse reported third-quarter net revenue of EUR 708 million, down 4% compared with the same period a year ago. Year to date, the exchange group still outperforms the prior year by about 10% both in terms of revenue as well as operating profit. Drivers for the weaker performance this quarter were lower derivatives trading activity, both in interest rates as well as power, and the low interest rate in the United States squeezing net interest income in the custodian business. Full-year guidance of net profit of EUR 1.2 billion was reiterated. We maintain our wide moat and stable trend ratings. Our fair value estimate of EUR 150 per share is unchanged. Shares trade in 4-star territory.