CME Group Stock To Top The Street Expectations In Q4

CME: CME Group logo
CME Group

CME Group (NASDAQ: CME) is scheduled to report its fiscal Q4 2022 results on Wednesday, February 8, 2023. We expect CME Group to top the consensus estimates of revenues and earnings. The company outperformed the street expectations in the last quarter, with net revenues increasing 11% y-o-y to $1.2 billion. It was due to a 14% increase in the clearing & transaction fees and a 6% rise in the market data & information services segment. Notably, the aggregate average daily volume (ADV) improved by 26% y-o-y in the quarter. We expect the same trend to continue in the fourth quarter. Notably, quarterly ADV has increased 6% y-o-y in Q4 (as per the latest monthly volume report).

Our forecast indicates that CME Group’s valuation is $206 per share, which is 16% above the current market price of $177. Our interactive dashboard analysis on CME Group’s Earnings Preview has more details. 

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(1) Revenues to remain marginally above the consensus estimates

CME Group’s revenues grew 8% y-o-y to $3.8 billion in the first three quarters of 2022. It was mainly driven by a 12% rise in the clearing & transaction fees (trading-driven revenues), followed by a 5% improvement in the market data & information services stream.

  • The total non-trading income decreased 11% y-o-y to $650 million over the first nine months of 2022. We expect the same trend to continue in Q4.
  • The clearing & transaction fees, which contribute close to 80% of the total revenues, increased by 12% over the same period. The growth was due to a higher average daily volume. We expect the same momentum to continue in Q4.
  • Overall, CME Group’s revenues are forecast to touch $5.04 billion in FY2022.

Trefis estimates CME Group’s fiscal Q4 2022 revenues to be around $1.23 billion, slightly above the $1.21 billion consensus estimate. 

2) EPS to edge past the consensus estimates

CME Group Q4 2022 adjusted earnings per share (EPS) is expected to be $1.92 per Trefis analysis, 2% above the consensus estimate of $1.88. The company’s adjusted net income marginally increased to $2.03 billion in the first nine months of 2022. It was due to lower non-operating income and a slight increase in the effective tax rate. We expect the fourth-quarter results to be on similar lines. Overall, the CME group’s annual GAAP EPS is likely to remain around $7.99 for FY2022.

(3) Stock price estimate is 16% higher than the current market price

We arrive at CME Group’s valuation, using a GAAP EPS estimate of around $7.99 and a P/E multiple of just below 26x in fiscal 2022. This translates into a price of $206, which is 16% above the current market price of around $177. 

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 Feb 2023
MTD [1]
YTD [1]
Total [2]
 CME Return 0% 5% 53%
 S&P 500 Return 1% 8% 85%
 Trefis Multi-Strategy Portfolio 3% 15% 261%

[1] Month-to-date and year-to-date as of 2/6/2023
[2] Cumulative total returns since the end of 2016

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