CME Group(CME) ZACKS·2024-09-05 16:20Core Viewpoint - CME Group Inc. has underperformed compared to the industry and S&P 500, with a 6.1% gain over the past year versus 20.3% and 23.6% respectively [1] Financial Performance - CME's return on equity over the trailing 12 months was 12.8%, below the industry average of 13.2%, indicating inefficiency in fund utilization [4] - The return on invested capital was 0.4%, significantly lower than the industry average of 4.8% [4] - The company expects expenses, excluding license fees but including cloud migration costs, to reach 6.01 billion, reflecting a 7.7% improvement [5] - For 2025, revenue estimates suggest a year-over-year increase of 2.7% from 2024 [5] Analyst Sentiment - Six out of eight analysts have raised their estimates for 2024, while two have lowered them; for 2025, seven out of nine analysts have raised estimates [6] - The consensus estimates for 2024 and 2025 have increased by 1.5% and 0.9% respectively over the past 60 days [6] Market Position and Strategy - CME Group holds a 90% market share in global futures trading and clearing services, benefiting from increased electronic trading volume and crypto asset adoption [6] - The company has maintained a free cash flow conversion rate of over 85% in recent quarters, indicating strong earnings [8] - CME's solid capital position supports strategic organic initiatives and product expansion [7] Dividend History - CME has returned approximately $25.2 billion to shareholders since initiating its variable dividend policy in 2012, with a five-year CAGR of 8.9% [10] - The latest dividend increase of 4.5% in February 2024 results in a dividend yield of 2.1%, surpassing the industry average of 1.5% [10] Valuation - CME Group is trading at a forward 12-month price-to-earnings ratio of 21.76X, lower than the industry average of 23.63X, presenting a compelling investment opportunity [12]