Accounting homework help. 320
200 160 120 100 80 60
40
18
5-for-1
Percent shares traded
45 30 15
Target Price Range 2023 2024 2025
CME GROUP NDQ-CME 168.93 24.8 25.522.0 1.19 2.0% TIMELINESS 3 Lowered 6/12/20 SAFETY 2 Raised 4/17/15 TECHNICAL 4 Lowered 10/9/20 BETA .95 (1.00 = Market)
18-Month Target Price Range Low-High Midpoint (% to Mid)
$131-$280 $206 (20%)
2023-25 PROJECTIONS Ann’l Total
Price Gain Return High 205 (+20%) 7% Low 155 (-10%) Nil Institutional Decisions
4Q2019 1Q2020 2Q2020 to Buy 521 446 487 to Sell 402 496 448 Hld’s(000) 308261 306550 303060
High: 69.2 70.6 64.7 60.9 84.7 93.9 100.9 124.0 155.3 197.1 224.9 225.4 Low: 31.0 46.9 47.0 44.9 51.0 66.4 83.4 81.9 113.3 143.7 161.0 131.8
% TOT. RETURN 8/20 THIS VL ARITH.*
STOCK INDEX 1 yr. -17.8 8.7 3 yr. 46.9 17.6 5 yr. 104.5 45.6
CAPITAL STRUCTURE as of 6/30/20 Total Debt $3440.9 mill. Due In 5 Yrs $1000 mill. LT Debt $3440.9 mill. LT Interest $175.0 mill. (Tot. Int. Coverage: 16.1x) (11% of Cap’l)
Leases, Uncapitalized Annual rentals $63.8 mill. Pension Assets-12/19 $345.9 mill.
Oblig. $324.2 mill. Pfd. Stock None Common Stock 358,623,764 shs. as of 7/15/20 Excl. 3,138 Class B shs. Three seats on the board of dir. are voted on by Class B shareholders only.
MARKET CAP: $58.1 billion (Large Cap) CURRENT POSITION 2018 2019 6/30/20
($MILL.) Cash Assets F 1447.4 1634.6 1493.5 Receivables 553.3 491.8 532.1 Other 39886.0 37567.8 79760.6 Current Assets 41886.7 43692.3 81786.2 Accts Payable 53.9 61.9 88.0 Debt Due – 574.2 – – – – Other 40582.4 38460.0 80113.4 Current Liab. 41272.6 38522.5 80201.4
ANNUAL RATES Past Past Est’d ’17-’19 of change (per sh) 10 Yrs. 5 Yrs. to ’23-’25 Revenues 5.0% 6.5% 5.5% ‘‘Cash Flow’’ 10.0% 18.5% 2.5% Earnings 10.0% 20.5% 2.5% Dividends 13.0% 9.0% 4.0% Book Value 3.0% 2.5% 6.0%
Cal- Full endar Year
QUARTERLY REVENUES ($ mill.) A Mar.31 Jun. 30 Sep. 30 Dec. 31
2017 929.3 924.6 890.8 900.0 3644.7 2018 1109.0 1059.6 904.2 1236.6 4309.4 2019 1179.6 1272.7 1277.3 1138.4 4868.0 2020 1522.1 1182.3 1300 1315.6 5320 2021 1550 1250 1350 1325 5475 Cal- Full
endar Year EARNINGS PER SHARE B
Mar.31 Jun. 30 Sep. 30 Dec. 31 2017 1.18 1.22 .91 8.63 11.94 2018 1.76 1.66 1.21 1.09 5.71 2019 1.39 1.43 1.78 1.31 5.91 2020 2.14 1.40 1.81 1.35 6.70 2021 2.25 1.50 1.85 1.40 7.00 Cal- Full
endar Year QUARTERLY DIVIDENDS PAID C
Mar.31 Jun.30 Sep.30 Dec.31 2016 .60 .60 .60 .60 2.40 2017 .66 .66 .66 .66 2.64 2018 .70 .70 .70 .70 2.80 2019 .75 .75 .75 .75 3.00 2020 .85 .85 .85
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 4.29 5.32 6.26 6.59 7.71 7.86 8.99 9.92 8.78 8.67 9.20 9.87 10.63 10.74 1.60 2.15 2.76 2.99 3.26 3.04 3.47 3.83 3.45 3.28 3.72 4.08 4.92 12.31 1.28 1.76 2.32 3.15 3.20 2.66 3.09 3.41 3.02 2.92 3.35 3.69 4.53 11.94 .21 .37 .50 .69 .92 .92 .92 1.12 1.79 1.80 1.88 2.00 2.40 2.64 .39 .50 .50 .61 .60 .47 .48 .52 .43 .37 .42 .34 .27 .24
4.75 6.47 8.72 46.19 56.27 58.04 60.02 65.18 64.55 62.43 61.82 61.00 60.14 66.07 171.06 172.98 174.18 266.41 332.10 332.56 334.24 330.64 331.83 338.85 338.45 336.94 338.24 339.24
21.3 30.6 40.0 36.6 24.9 20.2 19.1 16.4 17.9 23.7 22.8 25.4 22.1 10.6 1.13 1.63 2.16 1.94 1.50 1.35 1.22 1.03 1.14 1.33 1.20 1.28 1.16 .53 .8% .7% .5% .6% 1.2% 1.7% 1.6% 2.0% 3.3% 2.6% 2.5% 2.1% 2.4% 2.1%
3003.7 3280.6 2914.6 2936.3 3112.5 3326.8 3595.2 3644.7 66.0% 65.5% 58.8% 60.4% 61.1% 63.7% 64.9% 66.5% 129.9 128.5 136.9 135.1 132.6 129.2 129.2 113.0
1028.4 1137.6 1006.3 976.8 1127.1 1247.0 1534.1 4063.4 41.2% 42.0% 38.8% 38.9% 36.4% 36.3% 32.9% – – 34.2% 34.7% 34.5% 33.3% 36.2% 37.5% 42.7% NMF 606.3 1330.6 1101.0 1094.6 1014.1 1080.0 1085.9 1233.6
2104.8 2106.8 2106.8 2107.2 2107.9 2241.4 2231.2 2233.1 20060 21552 21419 21155 20924 20552 20341 22412 5.0% 5.1% 4.6% 4.5% 5.2% 5.7% 7.1% 16.7% 5.1% 5.3% 4.7% 4.6% 5.4% 6.1% 7.5% 18.1% 3.6% 3.5% 1.9% 1.8% 2.4% 2.8% 4.2% 14.5% 30% 33% 59% 61% 56% 54% 45% 20%
2018 2019 2020 2021 © VALUE LINE PUB. LLC 23-25 12.08 13.62 14.85 15.25 Revenues per sh A 16.65 5.83 6.36 7.20 7.50 ‘‘Cash Flow’’ per sh 9.55 5.71 5.91 6.70 7.00 Earnings per sh B 9.00 2.80 3.00 3.40 3.50 Div’ds Decl’d per sh C 3.60 .33 .69 .65 .65 Cap’l Spending per sh .25
72.64 73.09 74.85 78.40 Book Value per sh D 100.00 356.82 357.47 358.75 359.00 Common Shs Outst’g E 360.00
29.6 32.8 Bold figures are Value Line estimates
Avg Ann’l P/E Ratio 20.0 1.60 1.78 Relative P/E Ratio 1.10
1.7% 1.5% Avg Ann’l Div’d Yield 2.0%
4309.4 4868.0 5320 5475 Revenues ($mill) A 6000 63.3% 56.4% 58.0% 60.0% Operating Margin 75.0% 118.7 158.6 165 175 Depreciation ($mill) 200
1962.2 2116.5 2415 2520 Net Profit ($mill) 3240 29.3% 21.3% 24.5% 24.5% Income Tax Rate 24.5% 45.5% 43.5% 45.4% 46.0% Net Profit Margin 54.0% 614.1 1045.3 1250 1425 Working Cap’l ($mill) 1750
3826.8 3743.2 3400 3400 Long-Term Debt ($mill) 3400 25919 26129 26850 28150 Shr. Equity ($mill) 36000 6.9% 7.4% 8.0% 8.0% Return on Total Cap’l 8.0% 7.6% 8.1% 9.0% 9.0% Return on Shr. Equity 9.0% 3.8% 4.2% 4.5% 4.5% Retained to Com Eq 5.5% 49% 48% 51% 50% All Div’ds to Net Prof 40%
Company’s Financial Strength A Stock’s Price Stability 90 Price Growth Persistence 70 Earnings Predictability 40
(A) Through ’05, rev. are net of securities lend- ing int. expense. (B) Based on dil. shs. EPS may not sum due to rounding. Excl. n/r items: ’07, (72¢); ’08, ($3.88); ’09, (88¢). Next earn-
ings report due late Oct. (C) Div’ds hist. paid in late Mar., Jun., Sept., and Dec. Special divd’s: 10/10/08: $5.00; 3/26/12: $3.00; 12/28/12; $1.30; 1/14/14: $2.60; 1/13/15: $2.00; 1/12/16:
$2.90; 1/12/17: $3.25; 1/28/18: $1.75; 1/16/19: $1.75; 1/15/20: $2.50. (D) Incl. intang. In 2019: $33.035 bill., $92.41/sh. (E) In mill., adj. for split. (F) Incl. collateral from securities lending.
BUSINESS: CME Group Inc. is the world’s largest and most diver- sified derivatives marketplace. It enables clients to trade futures, options, cash, and over-the-counter (OTC) markets, optimize port- folios, and analyze date. It offers a range of global benchmark prod- ucts across major asset classes, incl. interest rates, equity indexes, foreign exchange (FX), agricultural commodities, energy, and met-
als. Clearing/transaction fees (81% of ’19 rev.), Market data (11%), and Other (8%). Acq. CBOT Holdings, 7/07; NYMEX, 8/08. Employs 4,360. Off./dir. own 1.2% of stock, Cap’l World, 10.0%; Vanguard, 7.9%; BlackRock, 7.1% (3/20 proxy). Inc.: DE. Chair/CEO: Terrence A. Duffy. Addr.: 20 S. Wacker Dr., Chicago, IL 60606. Tel.: 312-930-1000. Internet: www.cmegroup.com.
CME Group had somewhat of a breather during the June quarter. Fol- lowing a stellar showing during the first quarter, the top and bottom lines fell, both sequentially and year over year for the latest period. In all, share earnings slipped 2% on a 7% revenue decline. Even though it recorded decent gains in Market Data, Information Services, and Other revenues, clearing and transaction revenues slid al- most 11% during the June quarter, and dragged on its recent performance. Still, the exchange operator ought to post good comparisons this year. Coronavirus-related headwinds and ensu- ing market uncertainty may impact re- sults during the back half of the year, however, the volatile environment could increase trading activity and boost parts of CME’s business. Too, CME will likely bol- ster efficiencies and reduce operating ex- penses, which should aid margins moving forward. All told, share earnings will prob- ably advance between 10% and 15% for the full year, while revenues increase 5%- 10%. Likewise, the top and bottom lines should climb at a low single-digit clip through 2021.
CME Group has been strengthening its operations. The integration of acqui- sitions (including the NEX addition, com- pleted in 2018) should continue to bear fruit in the near term. Meanwhile, it has been focused on product innovation, specif- ically rolling out new offerings or tools and services to help its clients better manage risk and navigate market volatility. For example, in September, CME rolled out the FX Options Volatility Converter Tool. Plus, the exchange operator rolled out several new futures over the last few months, including the reintroduction of 3- year Treasury Note futures, Micro E-mini futures, and water futures. Technological enhancements will likely remain a key priority moving forward. These good quality shares are neutrally ranked for year-ahead price performance. Moreover, this issue does not stand out for its long-term capital ap- preciation potential. CME comes with a Safety rank of 2 and Financial Strength of A, however. And it offers a worthwhile div- idend yield. Consequently, CME holds decent risk adjusted income appeal. Orly Seidman October 9, 2020
LEGENDS 17.0 x ″Cash Flow″ p sh. . . . Relative Price Strength
5-for-1 split 7/12 Options: Yes Shaded area indicates recession
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