Market Volatility and Strong Cost Management Drive an Impressive Start to the Year for CME

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.