Why Should You Retain CME Group (CME) In Your Portfolio

Shares of CME Group Inc. (NASDAQ:CME) have outperformed the industry, quarter to date. The company also witnessed estimate revisions over the past 30 days. This Zacks Rank #3 (Hold) securities exchange is high on potential, driven by a few good growth drivers.

Positive Growth Projections: The Zacks Consensus Estimate for earnings is $4.81 for 2017, reflecting year-over-year growth of 6.28%. For 2018, the Zacks Consensus Estimate for earnings is pegged at $5.27, representing 9.41% year-over-year growth.

CME Group has long-term expected earnings per share growth of 10.6%.

An Outperformer: CME Group shares have rallied 18.4% in a year’s time, outperforming the industry’s 18.0% growth. Shares have also outperformed the S&P 500, increasing 11.0% over the same time frame.

Positive Earnings Surprise History: CME Group has surpassed the Zacks Consensus Estimate in the last four quarters. The company’s average four-quarter surprise is 2.19%.

Growth Drivers in Place: Fundamental growth remains a huge driver for the company’s improving operating leverage. As the company notes structural shifts in both the crude and natural gas markets (the United States is now becoming the swing producer in these markets), it remains focused to capitalize on and benefit from this shift.

The company’s decision to shut down London-based derivatives exchange and clearing house, CME Europe and CME Clearing Europe, by this year-end, will result in annual savings between $10 million and $12 million, which might hugely impact 2018. The same will also free up over $150 million in capital.

The company has also been witnessing better average daily volumes. Revenues too have improved. Management anticipates organic market data revenue growth of 5-6% over the next few years with 2017 being back-end loaded.

CME Group boasts a healthy balance sheet. The company holds a strong debt profile with no maturities until 2018 and again till 2022. Additionally, modest liquidity supports healthy capital deployment via dividend payouts, adding to the company’s financial flexibility.

Stocks to Consider

Some better-ranked stocks from the finance sector are American Financial Group, Inc. (NYSE:AFG) , CNO Financial Group, Inc. (NYSE:CNO) and Argo Group International Holdings, Ltd. (NASDAQ:AGII) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American Financial provides property and casualty insurance products in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 17.03%.

CNO Financial develops, markets and administers health insurance, annuity, individual life insurance and other insurance products for senior and middle-income markets in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 6.69%.

Argo Group underwrites specialty insurance and reinsurance products in the property and casualty market worldwide. The company delivered positive surprises in all the last four quarters with an average beat of 26.51%.

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