CME Group (NASDAQ: CME) is scheduled to report its fiscal Q2 2021 results on Wednesday, July 27, 2022. We expect CME Group to edge past the consensus estimates of revenues and earnings. The company outperformed the street expectations in the last quarter, with net revenues increasing 7% y-o-y to $1.3 billion. It was driven by a 19% y-o-y rise in the average daily volume (ADV), resulting in a 13% growth in the clearing & transaction fees (trading-driven revenues). We expect the same trend to continue in the second-quarter results. Notably, Q2 ADV has improved 25% y-o-y as per the recently released market statistics.
Our forecast indicates that CME Group’s valuation is $243 per share, which is 19% above the current market price of $204. Our interactive dashboard analysis on CME Group’s Earnings Preview has more details.
(1) Revenues expected to be just above the consensus estimates
CME Group’s revenues marginally decreased in 2021 to $4.7 billion. It was due to negative growth in both the trading and non-trading revenues.
- The clearing & transaction fees (trading revenues), which contribute close to 80% of the top-line, decreased 3% y-o-y in 2021. It was due to a 5% y-o-y decrease in the revenue-per-contract (RPC), partially offset by some growth in ADV. However, the segment revenues improved in the first quarter driven by higher ADV. We expect the same momentum to continue in the second quarter.
- The non-trading income decreased 6% y-o-y in 2021. Further, the same trend was observed in the first quarter of 2022. However, we expect it to see some positive growth in the second quarter.
- Overall, we estimate CME Group’s revenues to touch $5.1 billion in FY2022.
Trefis estimates CME Group’s fiscal Q2 2021 revenues to be around $1.26 billion, slightly above the $1.25 billion consensus estimate.
2) Adjusted EPS to marginally beat the consensus estimates
CME Group Q2 2022 adjusted earnings per share (EPS) is expected to be $1.97 per Trefis analysis, 2% above the consensus estimate of $1.93. The company’s adjusted net income in 2021 grew 24% y-o-y to $2.6 billion, despite a drop in the top line. It was due to a slight decrease in the total expenses as a % of revenues, coupled with higher investment income and higher other non-operating income. Further, the profitability figures improved in the first quarter of 2022 on a year-on-year basis, which was partly due to revenue growth and partly due to lower expenses as a % of revenues. We expect the second-quarter results to follow the same trend. Overall, the CME group’s annual GAAP EPS is likely to remain around $8.05 for FY2022.
(3) Stock price estimate is 19% higher than the current market price
We arrive at CME Group’s valuation, using an EPS estimate of around $8.05 and a P/E multiple of just above 30x in fiscal 2022. This translates into a price of $243, which is 19% above the current market price of around $204.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year
With inflation rising and the Fed raising interest rates, CME Group has fallen 10% this year. Can it drop more? See how low can CME Group stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||5%||-17%||77%|
|Trefis Multi-Strategy Portfolio||10%||-16%||235%|
 Month-to-date and year-to-date as of 7/25/2022
 Cumulative total returns since the end of 2016
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