CME earnings beat expectations

Written By: Shahzad Chaudhary on July 23, 2009 No Comment

Joseph Freeman/MEDILL

BY SHAHZAD CHAUDHARY — MEDILL NEWS SERVICE

The CME Group released its second quarter earnings today, smashing analyst expectations by 10 cents with a diluted EPS of $3.33.

The exchange’s CEO, Craig Donohue, credited strong cost-cutting measures and the success of new innovative products for the strong quarter, specifically mentioning the strong performance of newly developed interest rate products.

The net income for the second quarter was $221.8 million, a 10 percent increase from the prior-year period, while the diluted EPS was down from last year’s $3.67. Total revenue increased by 15 percent from the prior-year period to $648 million.

Importantly, the number of contracts traded in the second quarter of 2009 was down compared with last year. For example, interest rate products, which made up approximately 40 percent of the total contracts traded, averaged about 4.4 million per day, down from 6.5 million from the year-earlier period.

So what accounts for the increase in revenue? It could be the result of an increase in rate per contract. So for the interest rates products, the average rate increased from 52.2 cents to 52.5 cents and the increase rate of all products increased to 81.6 cents from 77.5 cents in the second quarter of last year.

During Thursday’s conference call, Executive Chairman Terry Duffy discussed the regulatory initiatives being taken in Washington D.C. He said the CME Group supported the Obama administration’s efforts to ensure high standards of integrity for the financial markets, but warned that speculators have been getting a bad reputation for no reason.

“In healthy markets, speculators are a critical part of the market and provide essential liquidity to hedgers or commercial participants,” he said.

Duffy also added that the blame placed on the speculators in the recent run-up in oil prices was undeserved. “The [energy] prices have been determined independent of market participants,” he said.

CME Group stock was up $3.15, or 1.1 percent, at $275.85 during Thursday afternoon trading.

Tags: Finance, futures exchange