CME Group Inc. (CME) reported its fourth-quarter 2011 operating earnings per share of $3.55, quite below the Zacks Consensus Estimate of $3.67 and $3.77 reported in the year-ago quarter. Operating net income slipped 6.8% to $235.6 million.

However, the reported net income soared up to $745.9 million or $11.25 per share from $196.2 million or $2.93 per share. This included net adjustments of $510.3 million related to a non-cash benefit from a tax adjustment primarily due to a revaluation of deferred tax liabilities, which was marginally offset by a negative impact of activities related to MF Global’s bankruptcy.

CME Group’s total revenue for the reported quarter crept down 3.5% year over year to $736.5 million, also lagging the Zacks Consensus Estimate of $753 million. The year-over-year dip was primarily due to a modest decline in the average daily volumes across most asset classes and stable average rate per contract.

CME Group’s average daily volume slipped 2% year over year to 11.7 million contracts in the reported quarter. However, total average rate per contract was flat from the year-ago quarter at 81.1 cents. The volumes constituted mostly of lower-priced financial products that require higher volume discounts.

Besides, CME Group’s clearing and transaction fees decreased 4.2% to $599.1 million. However, revenue earned from market data and information services inched up 1.6% year over year to $105.8 million. Besides, revenue from access and communication fee increased 20.0% year over year to $14.4 million while other revenues declined 20.7% year over year to $17.2 million.

Meanwhile, total operating expenses also climbed up 13.5% year over year to $346.1 million, as it included an expense of $27 million related to MF Global’s bankruptcy. As a result, operating margin dipped to 53.0% from 60.1% in the year-ago quarter.

Nevertheless, CME Group’s non-operating expense reduced 33.7% year over year to $20.7 million, primarily owing to interest expense and borrowing costs of $29.1 million and equity losses of $1.2 million, partially offset by $9.6 million of investment income.

Full-Year 2011 Highlights

For full-year 2011, CME Group recorded operating net income of $1.14 billion or $17.04 per share against $1.03 billion or $15.47 per share in 2010. Earnings per share came in slightly behind the Zacks Consensus Estimate of $17.18 per share.

Excluding extraordinary items, reported net income surged to $1.81 billion or $27.15 per share from $951.4 million or $14.31 per share. Total operating revenue climbed 9.2% year over year to $3.28 billion, although it marginally lagged the Zacks Consensus Estimate of $3.29 billion. Total expenses also increased 7.4% year over year to $1.26 billion. Consequently, operating margin climbed to 61.6% from 61.0% in 2010.

Financial Update

As of December 31, 2011, CME Group had $1.1 billion of cash and marketable securities, slightly down from $905.4 million at 2010-end. The company had $2.107 billion in long-term debt, marginally up from $2.105 billion at the end of 2010.

As of December 31, 2011, CME Group had total assets of $40.76 billion (up from $35.05 billion as of December 31, 2010) while total shareholders equity stood at $21.55 billion (up from $20.06 billion as of December 31, 2010). The company did not repurchase shares during the reported quarter.

Guidance

Previously, management had disclosed its aim of maintaining expense growth below 5% in 2012 and beyond.

Dividend Update

Concurrently, the board of CME Group announced a 59% hike in its regular quarterly dividend to $2.23 per share from $1.40 per share, thereby increasing its payout target to 50% from the prior 35%.

Additionally, the company’s board declared an additional, annual variable dividend, totaling $3.00 per share in 2012. This variable dividend shall now be CME Group’s regular annual dividend policy, which will be paid out with the regular dividend in the first quarter every year. However, the variable dividend will depend on the company’s operational growth.

Accordingly, both the hiked regular and variable dividends will be paid on March 26, 2012, to the shareholders of record as on March 9, 2012.

On December 29, 2011, CME Group paid its quarterly dividend of $1.40 per share to the shareholders of record as on December 19, 2011.

Peer Take

Yesterday, NASDAQ OMX Group Inc. (NDAQ) reported its fourth quarter operating earnings per share of 63 cents, which came in a nickel below the Zacks Consensus Estimate but modestly ahead of 55 cents in the prior-year quarter. Meanwhile, CME Group’s another prime peer, NYSE Euronext Inc. (NYX) is scheduled to release its results before the market opens on February 10, 2012.

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