Yahoo Finance Here's Why Hold Strategy is Apt for CME Group (CME) Stock
CME Group Inc. CME remains poised to gain from the strength of its global presence, a compelling product portfolio, increased electronic trading, its focus on over-the-counter clearing services and a solid capital position.
Growth Projections
The Zacks Consensus Estimate for CME Group's 2024 earnings per share indicates a year-over-year increase of 4%. The consensus estimate for revenues is pegged at $5.90 billion, implying a year-over-year improvement of 5.8%.
The consensus estimate for 2025 earnings per share and revenues indicates an increase of 1% and 3.2%, respectively, from the corresponding 2024 estimates.
Currently, the long-term earnings growth rate is 3.9%.
Northbound Estimate Revision
The Zacks Consensus Estimate for CME’s 2024 and 2025 earnings has moved 1.7% and 1.7% north, respectively, in the past 60 days. This should instill investors' confidence in the stock.
Earnings Surprise History
CME Group has a decent earnings surprise history. It beat estimates in each of the last four quarters with the average being 3.55%.
Zacks Rank & Price Performance
CME currently carries a Zacks Rank #3 (Hold). Over the past year, the stock has gained 6.8% compared with the industry’s growth of 32.4%.
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Growth Drivers
CME Group’s strength lies in its organic growth. It has a 90% market share of global futures trading and clearing services. With increased interest across the entire crypto economy, CME Group is witnessing growth in electronic trading volume and higher adoption of crypto assets. In 2023, 92% of the overall contract volume was generated through electronic trading on the CME Globex electronic platform.
Clearing and transaction fees, which contribute a major share of the top line, continue to benefit from increased volatility that aids trading volumes.
CME’s investments are also showing desirable results. It is focusing on improving margins through cost management. It expects its core expense to be $1.585 billion in 2024.
A solid capital position continues to support CME Group in deploying funds for strategic organic initiatives, expanding its product breadth and engaging in capital deployment.
CME Group, the largest futures exchange in the world in terms of trading volume as well as notional value traded, has been distributing wealth to shareholders by increasing payouts. It hiked dividends at a five-year CAGR (2019-2023) of 8%. Its dividend yield is 2.3%, better than the industry’s average of 1.3%, making the stock an attractive pick for yield-seeking investors. Also, CME Group pays five dividends per year, with the fifth being variable and based on excess cash flow in a year.
Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.
However, CME Group’s diversified product portfolio is significantly exposed to extreme interest rate volatility, currency fluctuation, strict government regulations and limited credit availability. The current unstable capital and credit markets can hamper liquidity and cause a decline in customer demand. This poses a concentration risk.
Stocks to Consider
Some better-ranked stocks from the finance sector are Radian Group Inc. RDN, Old Republic International Corporation ORI and EverQuote, Inc. EVER, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Radian Group has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 22.79%. In the past year, shares of RDN have jumped 21.5%.
The Zacks Consensus Estimate for RDN’s 2024 and 2025 revenues implies year-over-year growth of 8.2% and 4.9%, respectively.
Old Republic International has a solid track record of beating earnings estimates in three of the last four quarters while missing in one, the average being 6.61%. In the past year, shares of ORI have climbed 20.3%.
The Zacks Consensus Estimate for ORI’s 2024 and 2025 earnings implies year-over-year growth of 3.8% and 4.4%, respectively.
EverQuote has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 65.16%. In the past year, shares of EVER have skyrocketed 158.8%.
The Zacks Consensus Estimate for EVER’s 2024 and 2025 earnings implies year-over-year growth of 98% and 550%, respectively.
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CME Group Inc. (CME) : Free Stock Analysis Report
Radian Group Inc. (RDN) : Free Stock Analysis Report
EverQuote, Inc. (EVER) : Free Stock Analysis Report
Old Republic International Corporation (ORI) : Free Stock Analysis Report
