CBOE Holdings Poised For Growth; Stiff Competition A Drag

On May 23, 2016, we issued an updated research report on CBOE Holdings, Inc. (NASDAQ:CBOE) .

The securities exchange provider’s first-quarter 2016 earnings missed the Zacks Consensus Estimate but improved year over year. The company posted record first-quarter results, wherein it recorded increase in its earnings, revenues and operating margin. Moreover, the company engaged in the expansion of its proprietary product offering, while extending its global customer reach during the first quarter. This enabled it to lay the foundation for continued growth in 2016 and beyond.

CBOE Holdings has been strengthening its position in the futures business. The company’s S&P 500 index, SPX options continue to display growth. In the first quarter, the average daily volume (ADV) in SPX options rose 15% from the year-ago quarter. The gains were driven largely by strong weekly trading, which continues to attract new customers to its SPX marketplace.

Further, on Mar 29, 2016, the company listed options on two additional FTSE Russell Indexes, the FTSE 100 and the FTSE China 50. This move will enable the company’s investors to gain exposure to the largest and most liquid segments of the U.K. and Chinese equity markets. The new options will add to the growing international expansion of the company’s index options franchise which began with the launch of Morgan Stanley (NYSE:MS) Capital International (MSCI) products. With the support of sustained marketing and educational efforts, the company anticipates to experience early trading in its MSCI index products and maintain this growth in the future.

With respect to share buybacks, the company spent $42.4 million to buy back 0.7 million shares during the first quarter. As of Mar 31, 2016, the company has shares worth $115.1 million remaining under its authorization. Notably, about 10.7 million shares worth $484.9 million have been repurchased since the inception of the share buyback program in 2011.

Thus, with an efficient capital deployment strategy, no long-term debt and no acquisitions on the horizon, the company will continue to enhance shareholder value, thereby boosting investors’ confidence.

However, the company will continue to face stiff competition owing to increased market consolidation, which in turn tends to reduce market share and limit leverage of business. Also, industry volatility and sluggish credit quality raise concerns.

Zacks Rank and Stocks to Consider

Currently CBOE Holdings carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the finance sector are Cincinnati Financial Corp. (NASDAQ:CINF) , Markel Corp. (NYSE:MKL) and NMI Holdings, Inc. (NASDAQ:NMIH) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).

CINCINNATI FINL (CINF): Free Stock Analysis Report

MARKEL CORP (MKL): Free Stock Analysis Report

NMI HOLDINGS-A (NMIH): Free Stock Analysis Report

CBOE HOLDINGS (CBOE): Free Stock Analysis Report

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