A month has gone by since the last earnings report for Cboe Global Markets, Inc. (CBOE). Shares have added about 7.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cboe Global Markets, Inc. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Cboe Global Q1 Earnings & Revenues Top Estimates
Cboe Global Markets, Inc. reported first-quarter 2020 adjusted earnings of $1.65 per share that beat the Zacks Consensus Estimate by 7.1%. Moreover, the bottom line increased 48% year over year on increased trading activity, decline in expenses and operational efficiencies.
Total revenues came in at $358.3 million and beat the Zacks Consensus Estimate by 1.1%. The top line increased 28%, reflecting higher trading volumes across each business segment, particularly in options and futures.
Operational Details
Options revenues increased 36% year over year to $188.5 million driven by higher revenues from net transaction fees and market data. However, increase in royalty fees was a partial offset.
Revenues of U.S. Equities increased 14% year over year to $86.6 million, driven by higher revenue from net transaction fees as well as higher revenues from non-transaction fees.
Futures revenues of $40.1 million were up 36% year over year, reflecting growth in net transaction fees.
European Equities revenues improved 15% year over year to $26.2 million, increases in net transaction fees and non-transaction revenues.
Global FX revenues increased 22% to $16.9 million driven by higher net transaction fees.
Total adjusted operating expenses increased 5% year over year to $98.6 million attributable to higher compensation and benefits expense.
Adjusted operating income improved 39% year over year to $259.7 million with margin in the quarter under review expanding 600 basis points (bps) to 72.5%. The improvement was driven by higher net revenues and lower operating expenses.
Adjusted EBITDA margin of 74.2% expanded 770 bps.
Financial Update
CBOE Global had cash and cash equivalents of $165.2 million at quarter end, down about 28% from 2019 end. Total assets were $5.2 billion, up 2.4% from 2019 end.
At the end of the first quarter, long-term debt was $868.1 million, up 0.1% from 2019 end.
Total shareholders’ equity was $3.3 billion at the end of the reported quarter, up 1.4% from 2019 end.
Share Repurchase and Dividend Update
The company also bought back shares worth $119.5 million and paid out $40 million in dividends. As of Mar 31, 2020, the company had $179.7 million of availability remaining under its existing share repurchase authorizations.
2020 Guidance
Adjusted operating expenses are now expected to be in the range of $419 to $427 million, down $16 million from the previous guidance of $435 to $443 million, primarily reflecting near-term cost reductions due to the COVID-19 pandemic.
Capital expenditures are still expected in the $65-$70 million band.
Depreciation and amortization expense is estimated between $34 million and $38 million.
The effective tax rate on adjusted earnings is expected between 26.5% and 28.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, Cboe Global Markets, Inc. has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Cboe Global Markets, Inc. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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