CME Group Inc. (NASDAQ:CME) just released its latest third-quarter report and things are not looking great. Results look to have been somewhat negative - revenue fell 3.0% short of analyst estimates at US$1.1b, and statutory earnings of US$1.15 per share missed forecasts by 8.1%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on CME Group after the latest results.
Following last week's earnings report, CME Group's 19 analysts are forecasting 2021 revenues to be US$4.86b, approximately in line with the last 12 months. Per-share earnings are expected to accumulate 5.3% to US$6.33. In the lead-up to this report, the analysts had been modelling revenues of US$5.02b and earnings per share (EPS) of US$6.67 in 2021. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.
Despite the cuts to forecast earnings, there was no real change to the US$174 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values CME Group at US$229 per share, while the most bearish prices it at US$131. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 1.1%, a significant reduction from annual growth of 9.6% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.9% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - CME Group is expected to lag the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for CME Group. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for CME Group going out to 2024, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 2 warning signs for CME Group that you need to be mindful of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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