Please ensure Javascript is enabled for purposes of website accessibility

CME Group Stock Trading Lower on Q3 Earnings Drop

By Dave Kovaleski – Updated Oct 28, 2020 at 12:54PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The stock missed estimates on lower average daily volume on its exchanges.

It has been a rough quarter for financial stocks as another, CME Group (CME 0.32%), reported a drop in earnings in the third quarter today.

CME Group, which owns various derivatives exchanges, saw earnings drop 34% year over year to $411.7 million, or $1.15 per share.

Revenue fell roughly 15% to $1.1 billion year over year. The company, which makes most of its money on clearing and transaction fees, reported a big drop in that category as fees declined 19.7% to $835 million, versus the third quarter of 2019. Those losses were offset somewhat by a 7% increase year over year in market data and information services revenue to $139 million.

A screen showing a graph that depicts volatility on the stock market.

Image source: Getty Images.

The fees were down because average daily volume (ADV) was down. The ADV, which is the average number of shares traded in a day for any given stock, was 15.6 million contracts. That was down from 17.6 million in the second quarter and 20.2 million in the third quarter of 2019.

The volumes among interest rate products took the biggest hit, dropping to 5.3 million from 10.8 million in the third quarter of 2019. Energy was also down with ADV of 1.8 million, from 2.4 million year over year. But trading in equity index products was up to 5.4 million from 3.9 million year over year, while agricultural commodities and metals were up slightly.

"Despite the many challenges created by the ongoing pandemic, our metals, equities, agriculture and data services businesses showed strong performance during the third quarter," CEO Terry Duffy said.

Duffy said that despite the "extreme uncertainty," CME Group continued to innovate with the launch of several new products in the quarter, including Micro E-mini options and Nasdaq Veles California Water Index futures.

The stock price was down about 6% in early trading on Wednesday.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends CME Group. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.