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Here's Why Hold is an Apt Strategy for Cboe Global (CBOE) Now

Cboe Global Markets’ CBOE optimistic medium-term target, strong market position, global reach, strength in its proprietary products, solid capital position, effective capital deployment along with favorable growth estimates make it worth retaining in one’s portfolio.

CBOE has a decent track record of beating earnings estimates in three of the last four quarters.

Return on Equity

Return on equity, a measure reflecting how efficiently a company utilizes shareholders’ money, was 20.1% in the trailing twelve months, better than the industry average of 13.5%.

Zacks Rank & Price Performance

Cboe Global currently carries a Zacks Rank #3 (Hold). Year to date, the stock has lost 6.6%, much narrower than the industry’s decline of 34.6%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Estimate Revision

The Zacks Consensus Estimate for 2022 has moved north by 1.1%, while the consensus estimate for 2023 has moved 0.2% in the past 60 days, reflecting analyst optimism.

Growth Projections

The Zacks Consensus Estimate for Cboe Global’s 2022 earnings is pegged at $6.47, indicating a 6.9% increase from the year-ago reported figure on 13.6% higher revenues of $1.7 billion. The consensus estimate for 2023 earnings is pegged at $6.62, indicating a 2.4% increase from the year-ago reported figure on 4.8% higher revenues of $1.8 billion.

Growth Drivers

Cboe Global is the largest stock exchange operator by volume in the United States and a leading market globally for ETP trading. It remains focused on expanding its product portfolio, broadening geographic reach to the highest-value markets, diversifying its business mix with recurring revenues, ramping up growth with recurring non-transaction revenues and leveraging technology.

CBOE Global expects to deliver total net revenue growth of 9% to 11% in 2022, up from 5-7% annually guided earlier. Cboe Global expects organic net revenues from Data and Access Solutions to increase approximately 10% to 13% in 2022, up from the earlier guidance of 8% to 11%. For the mid-to-long term, CBOE estimates organic top-line compounded average growth of 4% to 6%.

Cboe Global Markets has an impressive inorganic growth story and projects inorganic net revenue growth to be 9% to 11% in 2022. The Bats Global buyout expanded and diversified its portfolio. MATCHNow helped it venture into Canada. BIDS Trading provided a meaningful presence in the substantial off-exchange segment of the U.S. equities market, while Chi-X Asia Pacific Holdings expanded its global equities business into the Asia Pacific region. CBOE estimates acquisitions held less than a year to add 2% to 3% to total net revenue growth in 2022.

CBOE has an impressive dividend history, increasing the same each year since its IPO. Also, this stock exchange operator had $233 million remaining under its existing share repurchase authorization as on Jun 30, 2022.

Stocks to Consider

Some better-ranked stocks from the finance sector include Berkshire Hathaway (BRK.B), ProAssurance Corporation PRA and American Financial Group AFG.

Berkshire Hathaway delivered a four-quarter average earnings surprise of 17.55%.  Year to date, the insurer has lost 6.6%.  BRK.B sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BRK.B’s 2022 and 2023 earnings implies a respective increase of 16.7% and 4.2% from the year-ago reported number.

ProAssurance delivered a four-quarter average earnings surprise of 150.98%. Year to date, PRA has lost 21.2%. PRA sports a Zacks Rank #1.

The Zacks Consensus Estimate for PRA’s 2022 and 2023 earnings has moved 26% and 13.9% north, respectively, in the past 60 days.

American Financial delivered a four-quarter average earnings surprise of 37.09%. Year to date, the insurer has lost 5.8%. AFG carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 2.8% and 3.8% north, respectively, in the past 60 days.


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