Earnings Preview: Chipotle, CME Group, NYSE, Disney, Kellogg, Expedia

February 5th is a big earnings day. Many large S&P 500 companies will be reporting Q4 earnings. We provided an earnings preview for several companies earlier, now we highlight some other prominent companies. Below we provide an earnings preview for Chipotle Mexican Grill, Inc. (NYSE: CMG), CME Group Inc (NASDAQ: CME), NYSE Euronext (NYSE: NYX), The Walt Disney Company (NYSE: DIS), Kellogg Company (NYSE: K), and Expedia Inc (NASDAQ: EXPE).


Chipotle Mexican Grill, Inc. (NYSE:CMG) is scheduled to report Q4 2012 on 2/5 after the market close. With Q4 EPS pre-released in the range of $1.92-$1.97, investor attention will likely shift to the company’s efforts to rekindle SSS growth momentum in 2013. Analysts at Wells Fargo Securities are looking for EPS of $1.97 (Street at $1.95), the high end of the company’s pre-release range of $1.92-$1.97. Q4 SSS were also pre-released up 3.8%. They expect investors to focus on : (1) Chipotle Mexican Grill, Inc. (NYSE:CMG) strategy to rekindle SSS momentum in 2013 (marketing, catering, new products) (2) new unit productivity trends and development color and (3) margin prospects given CMG’s outlook for mid-single digit commodity inflation and likely low-single digit pricing in 2013. Wells Fargo analysts recently lowered their FY 2012 EPS estimate to $8.77 from $8.99 and 2013E EPS to $10.15 from $10.54, valuation range moves to $315-325 from $270-280.

The analysts modeled approximately 4% SSS growth in 2013, which representing the company’s weakest SSS performance since 2009, would still rank among the strongest performances in the sector. Chipotle reported Q4 2012 SSS growth of 3.8%, the company’s lowest SSS number since Q1 2010. Their 4.3% 2013 SSS growth estimate is based on: (1) the still meaningful SSS contribution from development in new markets (approximately 31%) over the past three years, which have historically generated above-system-average SSS; (2) increased throughput during the peak lunch and dinner hours; and (3) approximately 1.3% menu pricing to offset the strong likelihood of continued protein cost inflation in 2013.

Chipotle has characterized a 2013 menu price increase as “likely” and expects it would take place mid-year. CMG stated on its Q3 2012 earnings call that based on its outlook for continued commodity inflation, it was “open” to a price increase in 2013. At a Jan. 17 investor conference, management stated that a price increase is “likely” and pointed to “mid-year” for the expected timing.

CME Group Inc (NASDAQ:CME) is reporting quarterly earnings on Tuesday after the close. Analysts at Stifel Nicholas recently reduced their 4Q12 EPS estimate by $0.03 to $0.63 on lower-than-expected 4Q futures ADV. This brings their FY12 estimate to $3.02, down from $3.05 previously. They also have reduced their FY13 estimate to $3.13 from $3.36, due in large part to a lower ADV forecast, as Stifel is now modeling 3.5% ADV growth, down from 5% previously. Sitfel has established their initial FY14 estimate of $3.55.

CME’s January volumes remain relatively soft, but analysts at Wells Fargo have noticed an uptick in the back half of the month. Average daily volume (ADV) of 11.4MM contracts was up 18% sequentially, but well below their Q1 2013 estimate of 12.8MM contracts. All asset classes are underperforming relative to their estimates. Positively, interest rate volumes have picked up noticeably from early January and they think this trend can continue as the macro environment continues to improve and investors keep a close eye on the Federal Reserve for any changes in policy. Q1 2013 bias is lower given the January metrics.

Volumes were up across the board from December, with the exception of Equities. Consolidated ADV was up 18% sequentially, but down 2% yr/yr. On a mo/mo basis, interest rates were up 46%, equities down 21%, foreign exchange up 9%, energy up 26%, ag up 17%, and metals up 35%. The decline in equities ADV was particularly surprising given the 8% sequential improvement in the cash market during the month.

Open interest closed the month significantly higher from December, which is typically the case to start the year due to December roll periods and holidays. Month-end open interest of 78MM was up from 70MM in December, though OI is still down 10% from the end of January 2012. CME Group Inc (NASDAQ:CME) should include its rate per contract for the three months ending in December in its Q4 earnings report.

NYSE Euronext (NYSE:NYX) is reporting Q4 earnings on February 5th. Analysts at Credit Suisse  recently reduced their 4Q EPS estimate to $0.37 (old: $0.42). Accounting for no further share repurchase activity, full year 2013-2015 EPS estimates are now $2.10, $2.40 and $2.55 (old: $2.15, $2.55 and $2.80). They adjusted their target price to $33 (old: $26) to account for ICE’s recent acquisition offer.

What’s New & Most Incremental? 1) Less favorable derivatives mix shift to end the year (more B-Clear); 2) Mixed revenue capture trends–stronger in European cash but weaker in U.S. cash; and 3) Meaningful less stock buyback activity given the recent merger announcement.

Derivatives Trading

European derivatives volumes weaker ex. BClear. During the December quarter, European derivatives volumes averaged 3.5 million contracts per day. Bclear volumes accounted for 35% of this quarter’s activity, up from 24% last quarter. Excluding Bclear, ADV of 2.3 million contracts was down 21% yr/yr and down 10% qtr/qtr.

Consolidated U.S. equity options volumes increase; NYX market share improved too. During the fourth quarter, overall volumes in multi-listed equity and ETF U.S. options averaged 14.3 million contracts per day (-8% yr/yr, +4% qtr/qtr) as volumes bucked the seasonal weakness on fiscal cliff uncertainty. NYSE’s market share in non-proprietary multi-listed products improved to 28% from 26% during the third quarter.

Cash Trading

European cash volumes decline. Trading activity in European cash equities fell 11% from last quarter and was down 26% from last year during 4Q. Looking forward, the analysts expect continued pressure on revenue capture trends here as the European equities market structure landscape continues to evolve (e.g., interoperability, more algo activity) and competition remains high.

U.S. cash equities volumes sluggish too. U.S. consolidated cash equity volumes averaged a weak 6.1 billion shares per day in the December quarter, down 18% from year-ago levels but up 2% from third quarter levels. 4Q consolidated volume by tape: Tape A -18% yr/yr, Tape B -33%, Tape C -6%.

U.S. cash market share stable. NYSE Euronext (NYSE: NYX)’s matched market share of U.S. equity volumes was 24% in the fourth quarter, a touch lower than 3Q. 4Q market share by tape: Tape A: 31%, Tape B: 21%, Tape C: 11%.

Revenue Capture Trends Mixed. With the company’s monthly update, NYSE Euronext (NYSE: NYX) provided a snapshot of preliminary pricing trends across the franchise for 4Q. Revenue capture trends were mixed during the December quarter. U.S. cash RPC was stable qtr/qtr and fell short of expectations—the analysts were hoping for some rebound here on the back of recent pricing actions.

In Europe, cash RPC increased by 8% and much better than anticipated–the analysts attribute the rebound to currency tailwinds, less in the way of SLP activity and mix shift related to open/close auctions. U.S. options RPC came in a touch lower than Credit Suisse anticipated–the estimates could be proven conservative if the company rounded down in today’s released revenue capture.

The Walt Disney Company (NYSE: DIS) will report Q1 earnings on Tuesday. After reviewing trends

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