Cboe Global Markets CBOE shares have rallied 9.7% year to date, outperforming the industry’s increase of 2.3%, the Finance sector’s rise of 0.8% and the Zacks S&P 500 composite’s rally of 5.2%. With a market capitalization of $20.7 billion, the average volume of shares traded in the last three months was 0.8 million.
Its strong market position, global reach, proprietary products’ strength and solid capital position continue to drive CBOE shares. The consensus estimate for 2024 and 2025 earnings of this Zacks Rank #2 (Buy) company has moved up 0.5% and 0.6% in the past seven days, reflecting analysts’ optimism.
CBOE is the largest stock exchange operator by volume in the United States and a leading market globally for ETP trading. A diversified business mix with recurring revenues, accelerated growth banking on recurring non-transaction revenues, use of technology and prudent buyouts poise it well for growth.
CBOE has a solid history of delivering earnings surprises in the last four reported quarters. Its earnings grew 12.1% in the last five years, better than the industry average of 9.8%.
Return on invested capital has hovered around 10% over the last few years. The company has raised its capital investment significantly, reflecting CBOE’s efficiency in utilizing funds to generate income.
Image Source: Zacks Investment Research
Business Tailwinds
CBOE’s strength lies in organic growth, as reflected in its revenue growth story. We estimate the 2026 top line to witness a three-year CAGR of 2.8%, primarily driven by transaction fees. CBOE anticipates organic total net revenue growth in the range of 5-7% in 2024, in line with medium-term organic total net revenue expectations. A volatile market drives trading volume, which, in turn, fuels transaction fees.
Improvement in recurring non-transaction revenues continues to drive the top line. CBOE estimates Data and Access Solutions organic net revenue growth in the range of 7%-10% in 2023. We estimate access and capacity fees in 2026 to witness a three-year CAGR of 5.8% and market data revenues to register a three-year CAGR of 4.7%.
Its inorganic growth story is also impressive. Acquisitions have helped it achieve a greater global breadth of services and products as well as new distribution channels apart from generating revenues and cost synergies.
CBOE remains committed to improving margins through cost management. It expects 2024 expense in the range of $798 million to $808 million.
A solid capital management policy aids the company in making strategic investments that drive growth as well as pay back its shareholders. CBOE increased dividends for 13 straight years and has $384 million left under its current share repurchase authorization.
The Zacks Consensus Estimate for 2024 earnings is pegged at $8.30, suggesting a year-over-year increase of 6.4% on 6.8% higher revenues of $2.1 billion. The consensus estimate for 2025 earnings is pegged at $8.82, suggesting a year-over-year increase of 6.3% on 4.1% higher revenues of $2.1 billion. The expected long-term earnings growth rate is 13.6%, better than the industry average of 8.9%.
The shares are trading at a price-to-earnings multiple of 23.35, lower than the industry average of 27.54. Before valuation expands, it is worthy to take a position in the stock, given its operational excellence.
Other Stocks to Consider
Some other top-ranked stocks from the finance sector are Intercontinental Exchange ICE, Coinbase Global COIN and Berkshire Hathaway Inc. (BRK.B).
Estimates for Intercontinental Exchange’s 2024 and 2025 earnings per share indicate a year-over-year increase of 5.2% and 11%, respectively. Year to date, ICE has gained 8.2%. The expected long-term earnings growth rate is 9.5%, better than the industry average of 8.9%. It carries a Zacks Rank #2.
Coinbase has a decent track record of beating earnings estimates in the last four quarters. COIN stock has climbed 20.1% year to date. The Zacks Consensus Estimate for COIN’s 2024 earnings per share indicates a year-over-year increase of 173%. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Berkshire delivered a trailing four-quarter average earnings surprise of 32.22%. Year to date, the stock has risen 15.6%. The Zacks Consensus Estimate for BRK.B’s 2024 and 2025 earnings suggests a year-over-year rise of 7.7% and 15.3%, respectively. It carries a Zacks Rank #2.
Intercontinental Exchange Inc. (ICE) : Free Stock Analysis Report
Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report
Cboe Global Markets, Inc. (CBOE) : Free Stock Analysis Report
Coinbase Global, Inc. (COIN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
