CME Group Stock To Beat The Street Expectations In Q3?

CME: CME Group logo
CME Group

CME Group (NASDAQ: CME) is scheduled to report its fiscal Q3 2022 results on Wednesday, October 26, 2022. We expect CME Group to edge past the consensus estimates for revenues and earnings. The company posted better-than-expected results in the last quarter, with net revenues increasing 5% y-o-y to $1.24 billion. It was driven by a 10% growth in the clearing & transaction fees, thanks to a 25% rise in the aggregate average daily volume (ADV). We expect the same trend to continue in the third quarter. Notably, quarterly ADV has increased 26% y-o-y in Q3, as per the latest monthly volume report.

Our forecast indicates that CME Group’s valuation is $210 per share, which is 22% above the current market price of $172. Our interactive dashboard analysis on CME Group’s Earnings Preview has more details. 

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(1) Revenues expected to be marginally above the consensus estimates

CME Group’s revenues increased 6% y-o-y to $2.58 billion in the first half of 2022, primarily driven by a 12% rise in the clearing & transaction fees (trading driven revenues).

  • The non-trading income decreased by 15% y-o-y over the first two quarters of 2022. Further, the third quarter numbers are likely to be on similar lines.
  • The trading revenues contribute around 80% of the top line. It increased in the first half due to higher ADV. We expect the same momentum to continue in Q3.
  • Overall, CME Group’s revenues are estimated to touch $5.15 billion in FY2022.

Trefis estimates CME Group’s fiscal Q3 2022 revenues to be around $1.23 billion, marginally above the $1.22 billion consensus estimate. 

2) EPS to slightly beat the consensus estimates

CME Group Q3 2022 adjusted earnings per share (EPS) is expected to be $1.96 per Trefis analysis, 1% above the consensus estimate of $1.94. The company’s adjusted net income improved 25% y-o-y to $1.36 billion in the first half of 2022. It was due to lower operating expenses as a % of revenues and higher investment income. We expect the third-quarter results to follow the same trend. Overall, the CME group’s annual GAAP EPS is likely to remain around $8.12 for FY2022.

(3) Stock price estimate is 22% more than the current market price

We arrive at CME Group’s valuation, using a GAAP EPS estimate of around $8.12 and a P/E multiple of just below 26x in fiscal 2022. This translates into a price of $210, which is 22% above the current market price of around $172. 

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 

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 Returns Oct 2022
MTD [1]
YTD [1]
Total [2]
 CME Return -3% -25% 49%
 S&P 500 Return 6% -20% 70%
 Trefis Multi-Strategy Portfolio 2% -25% 197%

[1] Month-to-date and year-to-date as of 10/25/2022
[2] Cumulative total returns since the end of 2016

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