- Financial exchange operator CME Group Inc. said Wednesday its third-quarter earnings rose 94 percent due to its $11.9 billion acquisition of the Chicago Board of Trade.
- CME, which also owns the Chicago Mercantile Exchange, reaped the benefits from market turmoil which has resulted in heavy speculating and hedging among investors. Clearing and transaction fee revenues from the two exchanges, assuming they had been combined a year ago, jumped 46 percent to $496 million.
- Profits easily topped Wall Street's expectations and total revenue more than doubled.
- "Almost any way we look at it, CME seems to have exceeded our estimates," said Goldman Sachs analyst Daniel Harris in a note to investors.
- Net income rose to $201.6 million, or $3.87 per share, from $103.8 million, or $2.95 per share, during the same quarter a year ago.
- "We saw robust growth in our agricultural, equity index, foreign exchange and interest rate products, as well as in our energy and metals derivatives processing business," CME Group Executive Chairman Terry Duffy said in a statement.
- Combining the Merc and Board of Trade creates the world's largest futures and options market for everything from interest rates to pork bellies, and makes it the world's No. 1 exchange of any kind by market value.
- The deal left CME with enough resources to expand globally, and late Tuesday the company said it has agreed to buy about 10 percent of Brazil's BM&F derivatives exchange in return for a 2 percent stake in CME worth about $700 million. The share swap is one of the first large transactions between a U.S. exchange and a South American financial-markets operator.
Takeaway: Really like this company and this should bode well for my smallish holding in Intercontinental Exchange (ICE). I like both of these because of their exposure to commodites and derivatives. My error with CME Group (CME) which was a pretty large position at one time was cutting it back when the stock did not respond in a timely manner. I was wondering why, with all the crazy volume in August (which should of benefited an exchange) the stock did not follow the rest of the market up in the post Fed cuts era. The stock didn't react but then came alive with about a month lag time compared to the rest of the market. So impatience cost me on this name. This is a richly valued stock so I didn't want to chase it once it broke out....
Long Intercontinental Exchange in fund; no personal position
