CME Group Earnings: Interest Rate and Inflation Uncertainty Keep Interest Rate Futures Volume High

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.