FOR PROFESSIONAL RESEARCH WRITER ONLY

2-3 page research assignment on the Chicago Mercantile Exchange. No Plagiarism Due Thursday November 12, 2020 

320

200
160
120
100
80
60

40

18

5-for-1

Percent
shares
traded

45
30
15

Target Price Range
2023 2024 2025

CME GROUP NDQ-CME 168.93 24.8 25.522.0 1.19 2.0%
TIMELINESS 3 Lowered 6/12/20
SAFETY 2 Raised 4/17/15
TECHNICAL 4 Lowered 10/9/20
BETA .95 (1.00 = Market)

18-Month Target Price Range
Low-High Midpoint (% to Mid)

$131-$280 $206 (20%)

2023-25 PROJECTIONS
Ann’l Total

Price Gain Return
High 205 (+20%) 7%
Low 155 (-10%) Nil
Institutional Decisions

4Q2019 1Q2020 2Q2020
to Buy 521 446 487
to Sell 402 496 448
Hld’s(000) 308261 306550 303060

High: 69.2 70.6 64.7 60.9 84.7 93.9 100.9 124.0 155.3 197.1 224.9 225.4
Low: 31.0 46.9 47.0 44.9 51.0 66.4 83.4 81.9 113.3 143.7 161.0 131.8

% TOT. RETURN 8/20
THIS VL ARITH.*

STOCK INDEX
1 yr. -17.8 8.7
3 yr. 46.9 17.6
5 yr. 104.5 45.6

CAPITAL STRUCTURE as of 6/30/20
Total Debt $3440.9 mill. Due In 5 Yrs $1000 mill.
LT Debt $3440.9 mill. LT Interest $175.0 mill.
(Tot. Int. Coverage: 16.1x) (11% of Cap’l)

Leases, Uncapitalized Annual rentals $63.8 mill.
Pension Assets-12/19 $345.9 mill.

Oblig. $324.2 mill.
Pfd. Stock None
Common Stock 358,623,764 shs.
as of 7/15/20
Excl. 3,138 Class B shs. Three seats on the board
of dir. are voted on by Class B shareholders only.

MARKET CAP: $58.1 billion (Large Cap)
CURRENT POSITION 2018 2019 6/30/20

($MILL.)
Cash Assets F 1447.4 1634.6 1493.5
Receivables 553.3 491.8 532.1
Other 39886.0 37567.8 79760.6
Current Assets 41886.7 43692.3 81786.2
Accts Payable 53.9 61.9 88.0
Debt Due – 574.2 – – – –
Other 40582.4 38460.0 80113.4
Current Liab. 41272.6 38522.5 80201.4

ANNUAL RATES Past Past Est’d ’17-’19
of change (per sh) 10 Yrs. 5 Yrs. to ’23-’25
Revenues 5.0% 6.5% 5.5%
‘‘Cash Flow’’ 10.0% 18.5% 2.5%
Earnings 10.0% 20.5% 2.5%
Dividends 13.0% 9.0% 4.0%
Book Value 3.0% 2.5% 6.0%

Cal- Full
endar Year

QUARTERLY REVENUES ($ mill.) A
Mar.31 Jun. 30 Sep. 30 Dec. 31

2017 929.3 924.6 890.8 900.0 3644.7
2018 1109.0 1059.6 904.2 1236.6 4309.4
2019 1179.6 1272.7 1277.3 1138.4 4868.0
2020 1522.1 1182.3 1300 1315.6 5320
2021 1550 1250 1350 1325 5475
Cal- Full

endar Year
EARNINGS PER SHARE B

Mar.31 Jun. 30 Sep. 30 Dec. 31
2017 1.18 1.22 .91 8.63 11.94
2018 1.76 1.66 1.21 1.09 5.71
2019 1.39 1.43 1.78 1.31 5.91
2020 2.14 1.40 1.81 1.35 6.70
2021 2.25 1.50 1.85 1.40 7.00
Cal- Full

endar Year
QUARTERLY DIVIDENDS PAID C

Mar.31 Jun.30 Sep.30 Dec.31
2016 .60 .60 .60 .60 2.40
2017 .66 .66 .66 .66 2.64
2018 .70 .70 .70 .70 2.80
2019 .75 .75 .75 .75 3.00
2020 .85 .85 .85

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
4.29 5.32 6.26 6.59 7.71 7.86 8.99 9.92 8.78 8.67 9.20 9.87 10.63 10.74
1.60 2.15 2.76 2.99 3.26 3.04 3.47 3.83 3.45 3.28 3.72 4.08 4.92 12.31
1.28 1.76 2.32 3.15 3.20 2.66 3.09 3.41 3.02 2.92 3.35 3.69 4.53 11.94
.21 .37 .50 .69 .92 .92 .92 1.12 1.79 1.80 1.88 2.00 2.40 2.64
.39 .50 .50 .61 .60 .47 .48 .52 .43 .37 .42 .34 .27 .24

4.75 6.47 8.72 46.19 56.27 58.04 60.02 65.18 64.55 62.43 61.82 61.00 60.14 66.07
171.06 172.98 174.18 266.41 332.10 332.56 334.24 330.64 331.83 338.85 338.45 336.94 338.24 339.24

21.3 30.6 40.0 36.6 24.9 20.2 19.1 16.4 17.9 23.7 22.8 25.4 22.1 10.6
1.13 1.63 2.16 1.94 1.50 1.35 1.22 1.03 1.14 1.33 1.20 1.28 1.16 .53
.8% .7% .5% .6% 1.2% 1.7% 1.6% 2.0% 3.3% 2.6% 2.5% 2.1% 2.4% 2.1%

3003.7 3280.6 2914.6 2936.3 3112.5 3326.8 3595.2 3644.7
66.0% 65.5% 58.8% 60.4% 61.1% 63.7% 64.9% 66.5%
129.9 128.5 136.9 135.1 132.6 129.2 129.2 113.0

1028.4 1137.6 1006.3 976.8 1127.1 1247.0 1534.1 4063.4
41.2% 42.0% 38.8% 38.9% 36.4% 36.3% 32.9% – –
34.2% 34.7% 34.5% 33.3% 36.2% 37.5% 42.7% NMF
606.3 1330.6 1101.0 1094.6 1014.1 1080.0 1085.9 1233.6

2104.8 2106.8 2106.8 2107.2 2107.9 2241.4 2231.2 2233.1
20060 21552 21419 21155 20924 20552 20341 22412
5.0% 5.1% 4.6% 4.5% 5.2% 5.7% 7.1% 16.7%
5.1% 5.3% 4.7% 4.6% 5.4% 6.1% 7.5% 18.1%
3.6% 3.5% 1.9% 1.8% 2.4% 2.8% 4.2% 14.5%
30% 33% 59% 61% 56% 54% 45% 20%

2018 2019 2020 2021 © VALUE LINE PUB. LLC 23-25
12.08 13.62 14.85 15.25 Revenues per sh A 16.65
5.83 6.36 7.20 7.50 ‘‘Cash Flow’’ per sh 9.55
5.71 5.91 6.70 7.00 Earnings per sh B 9.00
2.80 3.00 3.40 3.50 Div’ds Decl’d per sh C 3.60
.33 .69 .65 .65 Cap’l Spending per sh .25

72.64 73.09 74.85 78.40 Book Value per sh D 100.00
356.82 357.47 358.75 359.00 Common Shs Outst’g E 360.00

29.6 32.8 Bold figures are
Value Line
estimates

Avg Ann’l P/E Ratio 20.0
1.60 1.78 Relative P/E Ratio 1.10

1.7% 1.5% Avg Ann’l Div’d Yield 2.0%

4309.4 4868.0 5320 5475 Revenues ($mill) A 6000
63.3% 56.4% 58.0% 60.0% Operating Margin 75.0%
118.7 158.6 165 175 Depreciation ($mill) 200

1962.2 2116.5 2415 2520 Net Profit ($mill) 3240
29.3% 21.3% 24.5% 24.5% Income Tax Rate 24.5%
45.5% 43.5% 45.4% 46.0% Net Profit Margin 54.0%
614.1 1045.3 1250 1425 Working Cap’l ($mill) 1750

3826.8 3743.2 3400 3400 Long-Term Debt ($mill) 3400
25919 26129 26850 28150 Shr. Equity ($mill) 36000
6.9% 7.4% 8.0% 8.0% Return on Total Cap’l 8.0%
7.6% 8.1% 9.0% 9.0% Return on Shr. Equity 9.0%
3.8% 4.2% 4.5% 4.5% Retained to Com Eq 5.5%
49% 48% 51% 50% All Div’ds to Net Prof 40%

Company’s Financial Strength A
Stock’s Price Stability 90
Price Growth Persistence 70
Earnings Predictability 40

(A) Through ’05, rev. are net of securities lend-
ing int. expense. (B) Based on dil. shs. EPS
may not sum due to rounding. Excl. n/r items:
’07, (72¢); ’08, ($3.88); ’09, (88¢). Next earn-

ings report due late Oct. (C) Div’ds hist. paid in
late Mar., Jun., Sept., and Dec. Special divd’s:
10/10/08: $5.00; 3/26/12: $3.00; 12/28/12;
$1.30; 1/14/14: $2.60; 1/13/15: $2.00; 1/12/16:

$2.90; 1/12/17: $3.25; 1/28/18: $1.75; 1/16/19:
$1.75; 1/15/20: $2.50. (D) Incl. intang. In 2019:
$33.035 bill., $92.41/sh. (E) In mill., adj. for
split. (F) Incl. collateral from securities lending.

BUSINESS: CME Group Inc. is the world’s largest and most diver-
sified derivatives marketplace. It enables clients to trade futures,
options, cash, and over-the-counter (OTC) markets, optimize port-
folios, and analyze date. It offers a range of global benchmark prod-
ucts across major asset classes, incl. interest rates, equity indexes,
foreign exchange (FX), agricultural commodities, energy, and met-

als. Clearing/transaction fees (81% of ’19 rev.), Market data (11%),
and Other (8%). Acq. CBOT Holdings, 7/07; NYMEX, 8/08.
Employs 4,360. Off./dir. own 1.2% of stock, Cap’l World, 10.0%;
Vanguard, 7.9%; BlackRock, 7.1% (3/20 proxy). Inc.: DE.
Chair/CEO: Terrence A. Duffy. Addr.: 20 S. Wacker Dr., Chicago, IL
60606. Tel.: 312-930-1000. Internet: www.cmegroup.com.

CME Group had somewhat of a
breather during the June quarter. Fol-
lowing a stellar showing during the first
quarter, the top and bottom lines fell, both
sequentially and year over year for the
latest period. In all, share earnings slipped
2% on a 7% revenue decline. Even though
it recorded decent gains in Market Data,
Information Services, and Other revenues,
clearing and transaction revenues slid al-
most 11% during the June quarter, and
dragged on its recent performance.
Still, the exchange operator ought to
post good comparisons this year.
Coronavirus-related headwinds and ensu-
ing market uncertainty may impact re-
sults during the back half of the year,
however, the volatile environment could
increase trading activity and boost parts of
CME’s business. Too, CME will likely bol-
ster efficiencies and reduce operating ex-
penses, which should aid margins moving
forward. All told, share earnings will prob-
ably advance between 10% and 15% for
the full year, while revenues increase 5%-
10%. Likewise, the top and bottom lines
should climb at a low single-digit clip
through 2021.

CME Group has been strengthening
its operations. The integration of acqui-
sitions (including the NEX addition, com-
pleted in 2018) should continue to bear
fruit in the near term. Meanwhile, it has
been focused on product innovation, specif-
ically rolling out new offerings or tools and
services to help its clients better manage
risk and navigate market volatility. For
example, in September, CME rolled out
the FX Options Volatility Converter Tool.
Plus, the exchange operator rolled out
several new futures over the last few
months, including the reintroduction of 3-
year Treasury Note futures, Micro E-mini
futures, and water futures. Technological
enhancements will likely remain a key
priority moving forward.
These good quality shares are
neutrally ranked for year-ahead price
performance. Moreover, this issue does
not stand out for its long-term capital ap-
preciation potential. CME comes with a
Safety rank of 2 and Financial Strength of
A, however. And it offers a worthwhile div-
idend yield. Consequently, CME holds
decent risk adjusted income appeal.
Orly Seidman October 9, 2020

LEGENDS
17.0 x ″Cash Flow″ p sh. . . . Relative Price Strength

5-for-1 split 7/12
Options: Yes
Shaded area indicates recession

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