CME Group Dips to Underperform - Analyst Blog
01 Marzo 2013 - 6:20PM
Zacks
On Feb 27, we downgraded derivative exchange CME Group
Inc. (CME) to Underperform based on its weak top-line
growth over the last several quarters.
Why the Downgrade?
Estimates for CME Group have witnessed a steady decline since
its fourth-quarter 2012 results on Feb 5. The company’s fourth
quarter earnings of 63 cents a share were at par with the Zacks
Consensus Estimate, while total revenue of $660.9 million missed
the Zacks Consensus Estimate. Nonetheless, both earnings and
revenue lagged the year-ago results by 11.3% and 10.3%,
respectively.
Following the release of fourth quarter results, the Zacks
Consensus Estimate for 2013 has gone down 2.8% to $3.15 per share.
The Zacks Consensus Estimate for 2014 also slid 2.2% to $3.61 per
share. With the Zacks Consensus Estimates for both 2013 and 2014
going down, the company now has a Zacks Rank #5 (Strong Sell).
Cause for Concern
CME Group has been consistently generating low trading volumes
across asset classes and substantially reduced clearing-transaction
fees, which have been constricting top-line growth.
Low trading activity, currency and interest rate fluctuations as
well as a lack of any growth catalyst further raise a wary outlook
on the operating leverage in the upcoming quarters. The gradual
clearance of regulatory clouds also indicates higher capital
expenditure on infrastructure modifications.
The ongoing consolidation in the industry has raised caution
over the sustainability factor of the sturdy groups and poses an
uphill battle for companies trying to gain market share. Amid a
frail operating environment, CME Group also remains exposed to
intense competition.
The recently proposed merger of NYSE Euronext
Inc. (NYX) and IntercontinentalExchange
Inc. (ICE) – both Zacks Rank #3 (Hold) stocks – is
liable to snip off CME Group’s market share upon successful
completion.
Other Financial Stocks That Warrant a Look
While we prefer to avoid CME Group until we see some improvement
in its performance, Moody’s Corp. (MCO), carrying
a Zacks Rank #1 (Strong Buy) appears impressive.
CME GROUP INC (CME): Free Stock Analysis Report
INTERCONTINENTL (ICE): Free Stock Analysis Report
MOODYS CORP (MCO): Free Stock Analysis Report
NYSE EURONEXT (NYX): Free Stock Analysis Report
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