CME Profit Climbs on Busier Markets, Cost Cuts
July 28 2016 - 8:26AM
Dow Jones News
By Lisa Beilfuss
CME Group Inc. logged double-digit profit growth in its second
quarter amid busier energy and equity markets and ongoing expense
reductions.
The Chicago-based futures market -- the world's biggest --
generates most of its revenue from transaction fees, which rise and
fall with trading volume. Like other exchange operators, including
CBOE Holdings Inc. and Intercontinental Exchange Inc., CME saw
record trading volume in 2015. After a rough end to last year that
was dogged by concerns over China, rising recession fears in the
U.S. and whipsawing financial markets, trading volume has clawed
back.
CME said total volume in the quarter climbed 13% from a year
earlier, matching the first quarter's clip. A surge in energy
trading -- volume rose 33% from last year's quarter -- and in
equity markets, where average daily volume increased 25%, drove the
increase.
As trading activity turned higher, CME booked a similar 13% gain
in clearing and transaction fees. Such fees make up 85% of the
firm's top line.
Exchanges including CME have worked to diversify their
businesses, with some focusing on data provision as a source of
steady revenue to lean on when turbulent markets result in lower
trading fees. For CME, data revenue growth has been slowing in
recent quarters and was flat in the latest quarter, resulting in
overall revenue that fell short of expectations. In the first
quarter, data revenue rose 5.5% after having climbed at the end of
2015.
Chief Executive Terry Duffy on Thursday reiterated CME's focus
on expense management, partially crediting those efforts for
lifting second-quarter earnings. The company's operating margin
rose to 62.1% from 60.4% a year earlier.
In all, CME reported a profit of $320.1 million, or 95 cents a
share, up from $265 million, or 78 cents a share, a year earlier.
Excluding amortization costs, the effects of foreign-exchange
fluctuations and other items, per-share profit rose to $1.14 from
99 cents.
Revenue increased 11% to $906.4 million.
Analysts had projected $1.11 in earnings per share and $911.9
million in revenue, according to Thomson Reuters.
Shares in the company, up 13% this year, were inactive
premarket.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
July 28, 2016 08:11 ET (12:11 GMT)
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