CME Group (NASDAQ:CME) has had a stellar year so far, with its shares surging by an impressive 19.1% year to date, outpacing the industry’s 8% gain. Even the broader Finance sector, which saw a modest 2.3% increase, and the Zacks S&P 500 composite, which registered a 12.6% gain during the same period, couldn’t match CME’s remarkable performance. With a substantial market capitalization of $72.1 billion and an average trading volume of 1.3 million shares over the last three months, CME is clearly making waves.
Driving Forces Behind the Success
CME Group’s remarkable journey can be attributed to several key factors. Its extensive global presence, coupled with a compelling product portfolio and a strategic focus on over-the-counter clearing services, has played a pivotal role. Additionally, the company boasts a robust capital position, which has been a crucial driver of its success. CME has been consistently delivering positive earnings surprises for the past 11 consecutive quarters. Over the past five years, the company’s earnings have witnessed impressive growth, clocking in at 8.2%.
Sustaining the Momentum
The outlook for CME Group appears promising, as reflected in analysts’ optimistic projections. The consensus estimate for 2023 and 2024 earnings has seen upward revisions of 2 cents and 5 cents, respectively, over the past 60 days.
For 2023, the Zacks Consensus Estimate for CME Group’s earnings stands at $9.06, indicating a robust 13.7% increase, fueled by expected revenues of $5.5 billion, up 8.7% from the previous year. Looking ahead to 2024, the consensus estimate pegs earnings at $9.18, representing a steady 1.3% growth, with projected revenues of $5.6 billion, up 2.3%.
CME Group boasts a long-term earnings growth rate of 8.5%, surpassing the industry average of 7.9%. It’s estimated that the company’s bottom line will experience a three-year compound annual growth rate (CAGR) of 4.2% from 2022 to 2025.
As the largest futures exchange globally, CME Group’s trading volume and notional value traded are unmatched. Heightened market volatility has led to increased trading volumes, translating to higher clearing and transaction fees, which significantly contribute to the company’s top line. These fees are anticipated to grow at a three-year CAGR of 4.5% from 2022 to 2025.
CME Group’s dominance, with a staggering 90% market share in global futures trading and clearing services, combined with the rising adoption of electronic trading and an expanding array of crypto assets, is expected to further boost trading volumes. The company is well-positioned to capitalize on the growing interest in the entire crypto-economy.
Furthermore, CME Group is diversifying its revenue sources beyond transactions, with non-transactional revenues on the rise. These developments are projected to drive the company’s top line, with a three-year CAGR of 4.6% anticipated from 2022 to 2025.
CME Group maintains a sturdy balance sheet and financial flexibility, enabling strategic growth initiatives, including expanding market data offerings, introducing new product extensions, and efficient capital deployment.
Additionally, income-seeking investors can find value in CME Group’s dividend track record, with dividends increasing at a five-year CAGR of 8% from 2019 to 2023. The current dividend yield of 2.2% surpasses the industry average of 1.6%. Notably, CME Group distributes dividends five times a year, including a variable fifth payment based on excess cash flow for the year, making it an enticing choice for yield-oriented investors.
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Author Faith Yakubu 
