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Can Higher Revenues Drive CME Group's (CME) Q3 Earnings?

CME Group Inc. CME is set to report third-quarter earnings on Oct 26 before the market opens. The company delivered a positive earnings surprise in the last two quarters. Let’s see what it has in store for this yet-to-be reported quarter.

CME Group’s top line has likely improved owing to higher clearing and transaction fees. The company’s efforts to ramp up organic market data growth will add to the top line. The Zacks Consensus estimate for market data and information services are pegged at $96 million.

CME Group’s average daily volume (ADV) for the third quarter stood at 15.7 million contracts, up 10% year over year. Five of its six product lines delivered growth in ADV in the third quarter.

About 74% of CME Group’s metal options currently trade electronically. Metals’ ADV in the third quarter increased 42%, the highest across its six product lines.

However, license fees likely have increased on the back of transfer of the Russell products in July and aggregate changes in licenses.

The tax rate likely has increased in the third quarter, given an increase in the Illinois state income tax.

The Zacks Consensus Estimate for the third quarter is pegged at $1.16 per share on $889.9 million revenues. The bottom line reflects a 10.6% rise, while the top line translates to an increase of 5.7%, both on a year-over-year basis.

What our Quantitative Model Predicts

Our proven model does not conclusively show that CME Group is likely to beat estimates this quarter. This is because a stock needs to have the right combination of two main ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for an earnings beat. But that is not the case here as elaborated below.

Zacks ESP: CME Group has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they are reported with our https://www.zacks.com/premium/esp-buy?adid=zp_article_espfil...">Earnings ESP Filter.

CME Group Inc. Price and EPS Surprise

 

 

Zacks Rank: CME Group carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

 We caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks worth considering from the finance sector with the right combination of elements to come up with an earnings beat this quarter are as follows:

Prudential Financial PRU is set to report third-quarter earnings on Nov 1 with an Earnings ESP of +0.07% and a Zacks Rank #2. You can see https://www.zacks.com/stocks/buy-list/?ADID=zp_1link&ICI... _1link">the complete list of today’s Zacks #1 Rank stocks here.

Lincoln National Corporation LNC has an Earnings ESP of +0.05% and also holds a Zacks Rank of 2. The company is slated to report third-quarter earnings on Nov 1.

American Equity Investment Life Holding Company AEL has an Earnings ESP of +0.40%. This #2 Ranked company is set to report third-quarter earnings on Nov 6.

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Lincoln National Corporation (LNC): Free Stock Analysis Report
 
American Equity Investment Life Holding Company (AEL): Free Stock Analysis Report
 
Prudential Financial, Inc. (PRU): Free Stock Analysis Report
 
CME Group Inc. (CME): Free Stock Analysis Report
 
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