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CBOE (CBOE) Down 8.7% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for CBOE Holdings (CBOE). Shares have lost about 8.7% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is CBOE due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Cboe Global Q4 Earnings Beat Estimates, Rise Y/Y

Cboe Global Markets, Inc. fourth-quarter 2019 adjusted earnings of $1.21 per share beat the Zacks Consensus Estimate by 9%.

Moreover, the bottom line increased 21% year over year on decline in expenses and effect of share buyback.

Total revenues came in at $280.3 million and beat the Zacks Consensus Estimate by 2.3%. However, the top line decreased 16%, reflecting lower trading volumes across business segments, particularly in options and futures in the company’s proprietary index products, including SPX options and VIX options and futures.

Operational Details

Options revenues decreased 20% year over year to $139.4 million, primarily due to lower revenues from net transaction fees, offset somewhat by lower royalty fees and higher market data revenues.

Revenues of U.S. Equities decreased 7% year over year to $75.5 million, primarily due to lower revenues from net transaction fees, offset somewhat by higher revenues from non-transaction fees.

Futures revenues of $30.9 million were down 24% year over year, primarily due to lower net transaction fees.

European Equities revenues declined 11% year over year to $21.6 million, reflecting a decline in net transaction fees, offset by an increase in non-transaction revenues.

Global FX revenues declined 6% to $12.9 million due to lower net transaction fees compared with the fourth quarter of 2018.

Total adjusted operating expenses decreased 14% year over year to $95.6 million.

Adjusted operating margin in the quarter under review was 65.9%, down 70 basis points (bps).

Adjusted EBITDA margin of 70.2% contracted 160 bps.

Financial Update (As of Dec 31, 2019)

CBOE Global had cash and cash equivalents of $229.3 million, down 16.6% year over year. Total assets were $5.1 billion, down 3.9% year over year.

At the end of the fourth quarter, long-term debt was $867.6 million, down 5.2% year over year.

Total shareholders’ equity was $3.4 billion at the end of the reported quarter, up 3.5% year over year.

Share Repurchase and Dividend Update

The company also bought back shares worth $69.5 million and paid out $40.1 million in dividends.

2020 Guidance

Adjusted operating expenses are now expected between $435 million and $443 million, up from the previous estimate of $420-$428 million.

Capital expenditures are now projected in the $65-$70 million band and include expenditures associated with the company’s Chicago headquarters relocation occurring later in 2020 and its trading floor relocation planned for 2021.

Depreciation and amortization expense is estimated between $34 million and $38 million.

The effective tax rate on adjusted earnings for 2019 is expected between 26.5% and 28.5%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, CBOE has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, CBOE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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