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solzberg in Gainers & Losers,

CME Group's stock set to continue growth

CME Group, the second largest futures exchange in the world in terms of trading volume, recently issued solid financials for the second quarter of 2016. Revenues grew 10.5% y-o-y to a record $906.4 mn (although missed consensus estimate of $911 mn). The improvement was mainly driven by 12.6% higher clearing and transaction fees and 3.7% increase in access and communication fees. The company’s average daily volume was 15.1 mn contracts, up 13% y-o-y, and included a quarterly record for agricultural commodities. Besides, total average rate per contract of 78.2 cents was higher than 77.7 cents in the year-ago quarter. Operating income jumped 13.8% to $563.3 mn, and operating margin expanded 70 basis points to 62.1%. Adjusted earnings per share improved 15.2% to $1.14 and surpassed analysts’ average projection by 3 cents.

CME ended Q2 with $1.2 bn in cash and marketable securities and long-term debt of $2.2 bn. During the quarter, the company paid dividends worth $202 mn, bringing the amount paid in dividends to shareholders to date in 2016 to $1.4 bn.

I believe that growth in average daily volumes along with improvement in rate per contract and prudent expense management will continue to boost CME’s revenues and operating leverage going forward. 

I expect CME's shares to continue to rise, with medium-term target at $110.