CME Group Earnings Forecast: Growth Potential and Investment Considerations

CME Group (CME) is anticipated to report a significant increase in earnings for the quarter ending September 2024, supported by rising revenues. This positive outlook suggests a strong earnings performance, but how the actual figures compare to the analyst forecasts could greatly influence the company's stock price in the short term.

The earnings report is scheduled for release on October 23, 2024. If the reported earnings exceed expectations, it may boost the stock's value. Conversely, if the results fall short, the stock may experience a decline.

The sustainability of any immediate price change, as well as future earnings predictions, heavily relies on management's insights regarding business conditions during the earnings call. Thus, evaluating the likelihood of a positive earnings surprise is important.

Zacks Consensus Estimate

The parent company of the Chicago Board of Trade and other exchanges is projected to report quarterly earnings of $2.57 per share, representing a 14.2% increase from the previous year. In terms of revenue, expectations stand at $1.53 billion, reflecting an increase of 14.3% compared to the same quarter last year.

Estimate Revisions Trend

Throughout the past 30 days, the consensus EPS estimate has seen a 2.65% upward revision. This adjustment indicates a shift in the analysts' evaluations of the company's earnings performance. However, it is crucial to note that the overall change might not always mirror the direction of revisions from individual analysts.

Earnings Whisper

The revisions of estimates before a company's earnings report can provide insights into the business conditions for that quarter. The Zacks Earnings ESP (Expected Surprise Prediction) is designed to determine these insights by comparing the Most Accurate Estimate to the Zacks Consensus Estimate. The Most Accurate Estimate is a more recent assessment of the EPS compared to the consensus.

Analysts who revise their estimates close to the release date likely have access to the latest information, which could be more reliable than earlier forecasts. A positive or negative Earnings ESP may indicate how actual earnings could diverge from consensus expectations. Notably, a positive Earnings ESP is often a strong signal of a likely earnings beat, particularly when paired with a favorable Zacks Rank.

Research indicates that stocks with a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold) achieve positive surprises nearly 70% of the time. Conversely, a negative Earnings ESP does not guarantee an earnings miss, making predictions more challenging in such cases.

How Have the Numbers Shaped Up for CME?

For CME, the Most Accurate Estimate has surpassed the Zacks Consensus Estimate, signaling a bullish sentiment among analysts regarding the company’s earnings. As a result, CME has recorded an Earnings ESP of +3.02% along with a Zacks Rank of #2, suggesting a strong likelihood of beating the EPS estimate.

Does Earnings Surprise History Hold Any Clue?

When analysts evaluate future earnings, they often consider a company's historical performance in matching estimates. CME's recent earnings surprise history reveals that, in the last reported quarter, it was expected to earn $2.51 per share but actual results reached $2.56, marking a +1.99% surprise. Over the past four quarters, CME has consistently exceeded consensus EPS estimates, which supports positive anticipation for future performance.

Bottom Line

Ultimately, whether a stock rises or falls may not solely rely on whether it beats earnings expectations. Various external factors can lead to unexpected stock performance. Nevertheless, investing in stocks predicted to surpass earnings expectations increases the odds of a favorable outcome. Thus, it is essential to examine the company’s Earnings ESP and Zacks Rank ahead of quarterly results.

CME appears to be a promising candidate for an earnings beat, but investors should also consider other factors before deciding to buy into this stock ahead of its earnings announcement.

For more details on upcoming earnings releases, keeping an eye on an earnings calendar is advisable.

CME, Earnings, Investing