What To Expect From CME Group In Q4

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CME Group (NASDAQ:CME) had a fairly strong first three quarters of 2018, as the exchange managed to grow its revenue by just under 12% in the first 9 months of the year. This performance was primarily attributable to better-than-anticipated trading volumes across most product lines – FX, interest rates, equities, agriculture, and metals, coupled with robust growth in the Market Data segment and the corporate tax cut. We expect the exchange operator to announce another solid quarter when it reports on February 14. Owing to further volatility, CME’s Q4 average daily volumes grew by nearly 31% compared the prior year levels. This, coupled with the multiple interest rate hikes, solid growth in its bitcoin futures trading volume, and its expansion of futures products in emerging markets, should drive its Q4 results. In addition, CME’s acquisition of NEX Group should not only expand its presence in the European and Asian markets, but also broaden its futures, cash, and OTC offerings. As a result, we expect this deal to provide strong growth opportunities in the coming years. However, we expect the company to report higher expenses due to its various strategic investments, which should slightly dampen its bottom line in the near term. Below we take a closer look at what to expect in Q4.

We have a $165 price estimate for CME Group’s stock, which is slightly below the current market price. Our interactive dashboard on what to expect from CME in Q4 details our expectations for the company’s Q4 earnings. You can modify the charts in the dashboard to gauge the impact that changes in key drivers for CME would have on the company’s earnings and valuation, and see all of our Financial Services company data here.

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What To Expect

Trading volumes saw solid growth in the first nine months of 2018, fueled by multiple rate hikes during the year – which boosted investor interest in interest rate derivatives. As a result, these volumes came in 14% ahead of the levels seen in the first nine months of 2017. Further, the company reported robust growth across most of its product lines in Q4 – largely driven by uncertainties around the macro conditions and OPEC’s stance on capping oil production – and we expect these trends to continue. Consequently, we expect the company to report another quarter with strong growth in the Trading segment. Moreover, OPEC’s recent stance on capping production, and increased demand for crude oil in Asia – China, India, and other emerging markets – should fuel growth for this segment in the near term, as a result of enhanced price volatility. In addition, the continuous movements in gold and silver prices should further boost metals derivative volumes. As a result, we expect further volume growth with further improvement in the U.S. economy.

CME’s Market Data and Information Services segment witnessed solid growth for the company in the first three quarters of 2018. This was largely due to increased demand for its products, despite the price hike in April. CME remains bullish on its Market Data and Information Services outlook, with new products in the pipeline with enhanced business intelligence and machine learning capabilities. This should help boost its top line going forward.

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