The Trends To Watch In CME’s Q4 Earnings

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After a decent performance through Q3, we expect CME Group (NASDAQ:CME) to announce somewhat mixed Q4 earnings when it reports on February 1. Trading volumes saw a dip in November and December, with CME’s Q4 daily volumes coming in 2% below the prior year levels. Since transaction fees account for over 85% of CME’s revenue, a decline in quarterly volumes is likely to affect the company’s top line. Our interactive dashboard shows our expectations for the company’s Q4 earnings; you can modify the key value drivers to see how they impact the company’s results.

The Fed’s rate hikes, and the expectation of further rate hikes, led to a strong rise in interest rate derivative volumes, and the tough year-on-year comp led to a 4% decline in Q4 2017. Energy derivatives maintained solid volumes, but the marginal decline from the year ago levels was likely due to the strong demand towards the end of 2016, with a surge in oil prices due to cuts in production. The continuous movements in gold and silver prices – due to the strengthening U.S. dollar and other economic and political factors in the U.S. – have continued to boost metals derivative volumes. Equities continued to decline, largely due to a more volatile and favorable trading period last year. After remaining subdued for most of the year so far, agricultural commodities volumes increased with the hurricanes striking coastal regions.

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CME remains bullish on its market data and information services segment, with new products in the pipeline with enhanced business intelligence and machine learning capabilities. We expect that customers will continue to use these services even as the company increasingly charges for them. This should help boost its top line going forward.

We have a $120 price estimate for CME’s stock, which is below the current market price.

See the full Trefis analysis for CME Group.

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