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CME GROUP INC CL A Reports Operating Results (10-Q)

August 08, 2012 | About:
10qk

10qk

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CME GROUP INC CL A (CME) filed Quarterly Report for the period ended 2012-06-30.

Cme Group Inc has a market cap of $16.92 billion; its shares were traded at around $52.95 with a P/E ratio of 15.2 and P/S ratio of 5.2. The dividend yield of Cme Group Inc stocks is 3.5%. Cme Group Inc had an annual average earning growth of 17.9% over the past 10 years. GuruFocus rated Cme Group Inc the business predictability rank of 3.5-star.

Highlight of Business Operations:

We bill a substantial portion of our clearing and transaction fees to our clearing firms. The majority of clearing and transaction fees received from clearing firms represent charges for trades executed and cleared on behalf of their customers. One firm represented 13% and one firm represented 12% of our clearing and transaction fees revenue in the first six months of 2012. Should a clearing firm withdraw, we believe that the customer portion of the firm s trading activity would likely transfer to another clearing firm of the exchange. Therefore, we do not believe we are exposed to significant risk from the ongoing loss of revenue received from or through a particular clearing firm.

The increase in market data and information services revenue in the second quarter and first six months of 2012 when compared with the same periods in 2011 was attributable to the increase in our basic device monthly service fee from $61 per month to $70 per month for each device. The increase in the second quarter and first six months of 2012 was partially offset by a decrease in basic device counts in the second quarter and first six months of 2012 when compared with the same period in 2011 due to cost-cutting initiatives at customer firms.

The two largest resellers of our market data represented approximately 42% of our market data and information services revenue in the first six months of 2012. Despite this concentration, we consider exposure to significant risk of revenue loss to be minimal. In the event that one of these vendors no longer subscribes to our market data, we believe the majority of that vendor s customers would likely subscribe to our market data through another reseller. Additionally, several of our largest institutional customers that utilize services from our two largest resellers report usage and remit payment of their fees directly to us.

We launched our co-location program in the first quarter of 2012, which generated $13.9 million and $23.6 million of access and communication revenue in the second quarter and first six months of 2012, respectively. The increase in revenue was partially offset by a decrease in revenue generated from other network connections due to clearing firms migrating to the co-location program.

In the second quarter of 2011, we recognized a $9.8 million gain on the sale of certain Index Services assets related to one of its service offerings, which contributed to a decrease in other revenues in the second quarter and first six months of 2012 when compared with the same periods in 2011. In April 2012, we sold two buildings in Chicago, which resulted in a decrease in rental income of $4.5 million in the second quarter and first six months of 2012 compared with the same periods in 2011. In addition, the initial development phase to develop a new multi-asset class electronic platform for BM&FBOVESPA S.A. (BM&FBOVESPA) was completed in the third quarter of 2011, which resulted in a decrease in other revenues in the second quarter and first six months of 2012 when compared with the same period in 2011. This agreement with BM&FBOVESPA generated $0.9 million and $4.2 million in the second quarter and first six months of 2011, respectively. Additional revenue related to the development of the electronic platform will not be recognized until future phases of development are delivered. The decrease in other revenues was partially offset by an increase of $2.1 million and $2.8 million, respectively, in processing services revenue generated from various strategic relationships in the second quarter and first six months of 2012 when compared with the same periods in 2011.

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