CME Earnings Preview: Impressive Growth In Trading Volumes To Propel Revenue Growth

January 31st, 2017 by Trefis Team
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CME Group‘s (NASDAQ:CME) performance during the first nine months of 2016 was strong and we expect this trend to continue when the company reports its fourth quarter earnings on February 2nd. The consensus estimates suggest nearly 12% growth in the exchange’s revenue and 22% growth in its EPS. Increased volatility in derivatives market across multiple asset classes including oil, metal and interest rates has attracted investors’ attention. This drove nearly 24% growth in trading volumes for the fourth quarter, and 12% for the full year. We believe CME’s efforts to expand its global footprint and its diverse product line to suit the investors’ demand are likely to boost its top-line.

Market Conditions Were Ripe For Trading In The Fourth Quarter

The continuous fluctuation in oil prices, due to over-supply and governing bodies’ uncertainties around capping the production, have kept its trading volumes high throughout the year. With the recent announcement of capping the production, the recovery in oil prices have driven the volatility and consequently, the exchange saw 27% growth in its trading volumes for Q4.

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The investors’ move to stick with safer investment options, amid unfavorable macro conditions, drove the demand for precious metals like gold and silver soar and thereby, promote the trading volumes for metals. Daily trading volumes for the fourth quarter and full year  grew year on year by 49% and 34%, respectively.

The investors’ move to stick with safer investment options, amid unfavorable macro conditions drove the demand for precious metals such as gold and silver, promote the trading volumes for metals. Daily trading volumes for the fourth quarter and year  grew year on year by 49% and 34%, respectively. 

Equity derivative have picked up pace under increased volatility from the improvement in U.S. macro conditions and the recently concluded presidential elections.

With growth across all its product lines and the company generating around 85% of its overall revenues from transaction services, we expect the company to post a strong earnings for the last quarter.

See the full Trefis analysis for CME Group.

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