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CME Group (CME) Q3 Earnings Beat on Higher Trading Volumes

CME Group Inc. CME reported third-quarter 2017 adjusted earnings per share of $1.19, beating the Zacks Consensus Estimate of $1.16. The bottom line also improved 13.3% year over year.

Results were primarily driven by higher trading volumes. Options business remained sturdy in the quarter.

CME Group Inc. Price, Consensus and EPS Surprise

Including one-time items, the net income was 91 cents per share, down 34.5% year over year.

Performance in Detail

CME Group’s revenues of $891 million increased 5.8% year over year. This reported figure marginally beat the Zacks Consensus Estimate of $890 million. Improvement in revenues may be attributable to higher clearing and transaction fees (up 7% year over year), plus access and communication fees (up nearly 8%).

Total expenses increased 2.1% year over year to $322.9 million during the reported quarter, attributable to a rise in compensation and benefits, technology support services as well as licensing and other fee agreements.

Operating income improved about 8.1% to $567.9 million from the prior-year quarter.

Average daily volume (ADV) rose 10% year over year to a record 15.7 million contracts with growth across five of the six product lines. Average rate per contract increased in only one of the six product lines.

Financial Update

As of Sep 30, 2017, CME Group had $1.7 billion of cash and marketable securities, down 10% from the year-end 2016. As of Sep 30, 2017, long-term debt of $2.2 billion inched up 0.1% from  year-end 2016 figure.

As of Sep 30, 2017, the company had total assets worth $78.3 billion, up from $69.4 billion at year-end 2016.

The company paid dividends worth $224 million in the reported quarter.

Our Take

CME Group’s results reflect a solid performance. The company remains well-positioned for growth, given its strong market position with diverse derivative product lines. Efforts to expand and cross-sell core exchange-traded business through strategic alliances and acquisitions, new product initiatives and global reach, boost growth. However, escalating costs and stiff competition remain key challenges.

Currently, CME Group carries a Zacks Rank # 3 (Hold). You can see _1link">the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Companies in Securities Exchange Industry

While the bottom line at Nasdaq, Inc. NDAQ beat the Zacks Consensus Estimate, the same at MarketAxess Holdings Inc. MKTX missed the estimates in the third quarter of 2017.

Intercontinental Exchange Inc. ICE will report third-quarter results on Nov 2 before the market opens. The Zacks Consensus Estimate is pegged at 71 cents, up 10.4% year over year.

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