What Are CME’s Key Sources of Revenue?

CME Group (NASDAQ:CME) has seen its revenue grow at a CAGR of 6% and stock price triple in between 2013 and 2017. We attribute this performance primarily to the growth in the company’s trading segment, driven by increased volatility in derivatives market including energy, interest rate and metals.

We have a $146 price estimate for CME’s stock, which is below the current market price. We expect the company’s overall revenues to grow by around 5% in 2018. Our interactive dashboard shows the historical trends and our expectations for the company’s FY’18 top line; you can modify the key value drivers to see how they impact the company’s revenues.

Interest Rate Derivatives Continued To Grow Under Fed Guidance

Interest rate derivatives have been the highest in terms of trading volumes and revenue contribution, with over 8% annual revenue growth. The uncertainty around macro conditions and Fed’s indication of interest rate hikes and consequent hikes led to a significant increase in derivative volumes throughout the period.

Oil Prices Have Led To Improved Volumes

The demand-supply gap led to increased volatility in the oil market throughout the last 5 years. Oil prices have continued to fluctuate due to OPEC’s stance on capping production. This propelled 11% and 7% annual growth in energy derivative volumes and revenue, respectively. Since the outlook for the restricted production of oil remains uncertain, we expect the market volatility to sustain in the near term, thus leading to continued growth in trading volumes.

See the full Trefis analysis for Intercontinental Exchange