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CME Group Q4 Profit Down 78%

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2/5/2013 10:30 PM ET

Exchange operator CME Group Inc. (CME: Quote) on Tuesday reported a 78 percent plunge in profit for the fourth quarter from last year, reflecting a tax expense and weak trading volume.

Chicago, Illinois-based CME, formerly known as Chicago Mercantile Exchange Holdings Inc., is the operator of the CME as well as the New York Mercantile Exchange or NYMEX.

The company's clearing and transaction fees for the fourth quarter declined 9 percent from the year-ago period to $544.6 million, while market data and information services revenues fell 25 percent to $79.3 million. Access and communication fees surged 62 percent to $23.3 million.

Aerage daily trading volume in the quarter declined 13 percent from the year-ago period to 10.2 million contracts. This drove the decrease in clearing and transaction fee revenues. However, average rate per contract rose 2 percent from the prior-year period to $0.83.

Income tax provision for the quarter was $185.4 million, compared to tax benefit of $377.0 million in the same period last year.

The company's fourth-quarter net income was $166.8 million or $0.50 per share, down sharply from $745.9 million or $2.25 per share last year.

The latest quarter's results include a tax expense of $43.5 million due to a revaluation of the company's deferred income tax liabilities as a result of revisions to the company's state tax apportionment. The tax expense also reflects increases in deferred income tax liabilities associated with S&P Dow Jones Indices.

On an adjusted basis, earnings for the latest quarter were $0.63 per share. On average, eighteen analysts polled by Thomson Reuters expected the company to report earnings of $0.63 per share for the quarter. Analysts' estimates typically exclude one-time items.

Total revenues for the period declined 10 percent to $660.9 million from $736.5 million in the same period last year. Analysts had a consensus revenue estimate of $660.2 million.

For fiscal 2012, CME Group's net income declined to $896.3 million or $2.70 per share from $1.81 billion or $5.43 per share in the prior year. Total revenues decreased 11 percent to $2.91 billion from $3.28 billion in the previous year. Analysts expected the company to earn $3.03 per share for the year on revenues of $2.91 billion.

Terry Duffy, Executive Chairman and President of CME Group said, "Despite facing a difficult environment with low volatility in 2012, we made significant progress in advancing our global strategy while preparing for the changing regulatory landscape. We will further expand our footprint in Europe with the proposed launch of a new London-based exchange, and we continued to strengthen our position in Asia."

CME closed Tuesday's trading at $59.18, up $0.90 or 1.54 percent on a volume of 2.29 million shares. However, in after-hours, the stock declined $1.18 or 1.99 percent to $58.00.

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by RTT Staff Writer

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