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solzberg in Gainers & Losers,

Solid Q3 figures to drive CME's stock

CME Group, the second largest futures exchange in the world in terms of trading volume, reported strong financials for the third quarter of 2015. Revenues increased 11.5% y-o-y to $850.3 mn and surpassed consensus estimate of $846 mn. The growth was primarily attributable to improvement in clearing and transaction fees (up 11.4%), market data and information services (up 13.5%) and access and communication fees (up 3.8%). The company’s average daily volume jumped 7% y-o-y to 14.4 mn contracts in the quarter. Operating expenses inched up just 0.6% to $333.9 mn due to solid expense discipline, and operating income rose 20% to $516.4 mn, with operating margin expanding 4.2 percentage points to 60.7%. Adjusted earnings per share jumped 21.4% to $1.02 topping analysts’ average projection of 98 cents. In Q3, CME paid dividends worth of $168 mn or 50 cents per share, which offers annualized dividend yield of 2.1%.

My outlook for CME remains optimistic. I believe that increasing trading volumes and non-transaction revenues combined with aggressive focus on improving execution and enhancing efficiency will continue to drive the company’s financials going forward. I also note that CME’s growth initiatives are significantly increasing its global activity, with electronic trading revenues from customers outside the United States reaching a record 32% in Q3. Additionally, the Letter of Intent with Taiwan Futures Exchange and Korea Financial Investment Association opens new growth opportunities in Asia.

Currently, CME’s stock is testing a $98.5 resistance level. I'd buy on breaking it out, with the medium-term goal of $105..