Cboe Global Markets (CBOE) Q3 Earnings Top Estimates, Up Y/Y

Cboe Global Markets, Inc.’s (NASDAQ:CBOE) third-quarter 2017 adjusted earnings of 89 cents per share beat the Zacks Consensus Estimate of 88 cents by 1.1%. Also, the bottom line surged 53.4% year over year.

CBOE Holdings, Inc. came to be known as Cboe Global Markets, Inc. with effect from Oct 17, 2017. The new name and identity will better represent the evolving nature and spirit of the company and this change came after the acquisition of Bats Global Markets on Feb 28, 2017.

Results were driven by higher revenues, partially offset by increased expenses. The company also recorded increased trading volume in the quarter.

On a GAAP basis, net income allocated to common stockholders was 53 cents per share, up 6% year over year.

Operational Details

In the third quarter, total revenues came in at $269.7 million, which missed the Zacks Consensus Estimate by 0.5%. The top line however, improved 98% year over year.

Net revenues came in at $112.6 million. This upside came on the back of Bats Global Markets’ contribution in the third quarter as well as an increase in net transaction fees.

Average daily volume for Options were 6.751 million, up nearly 11% year over year while that of Futures was 0.3 million, up nearly 35.7% year over year.

Total revenues per contract for Options rose 5.6% year over year to 24.7 cents. Total RPC for U.S. Futures increased 2.5% year over year to $1.752.

Total operating expenses increased 113.6% year over year to $150.4 million, primarily due to higher compensation and benefits, professional fees and outside services, depreciation and amortization, technology support services, travel and promotional expenses, facilities costs as well as change in contingent consideration and other expenses, respectively.

On a combined adjusted basis, expenses declined 2% from the prior-year quarter.

Adjusted operating margin expanded 660 basis points year over year to 62.2%.

Financial Update

As of Sep 30, 2017, CBOE Holdings had cash and cash equivalents of $124.8 million, up 28.3% from $97.3 million at the end of 2016. Total assets were $5.2 billion at the end of the third quarter compared with $476.7 million at year-end 2016.

Total shareholders’ equity was $2.9 billion at the end of the reported quarter compared with $317.9 million as of Dec 31, 2016.

Dividend Update

On Oct 27, 2017, the board of directors approved a dividend of 27 cents per share. The amount will be paid on Dec 15 to shareholders of record as of Dec 1.

The company paid cash dividends worth $30.6 million or 27 cents per share this quarter.

2017 Outlook

The guidance for 2017 takes into account the company’s acquisition of Bats Global Markets.

Adjusted operating expenses are expected in the range of $413-$415 million (down from the prior guidance of $415-$423 million).

Depreciation and amortization expenses (included in adjusted operating expenses) are projected in the range of $52-$54 million, excluding the amortization of acquired intangibles of $169 million.

Capital expenditures are estimated in the range of $49-$53 million (down from the previously guided range of $55-$60 million) based on the company’s ongoing investments in systems hardware and software, including CBOE Holdings’ systems migration to Bats Global Markets’ technology.

The effective tax rate is currently anticipated to be within 36.0-37.0% compared with the previous guidance of 35.5-37.5%.

Zacks Rank

Cboe Global Markets carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Players

Among other players from the securities and exchange industry that have reported third-quarter earnings so far, the bottom line of CME Group Inc. (NASDAQ:CME) and Intercontinental Exchange, Inc. (NYSE:ICE) beat the respective Zacks Consensus Estimate, while MarketAxess Holdings Inc. (NASDAQ:MKTX) missed the same.

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