Deutsche Boerse Earnings: Good Performance as Revenue Outpaces Expenses

Deutsche Boerse reported first-quarter EPS of EUR 2.70, up 5% versus the same period last year and consensus estimates of EUR 2.56 per share collected by the exchange group prior to the release. Revenue grew 6% organically, if we exclude the contribution of the SimCorp acquisition. Net interest income continued to boost Deutsche Boerse’s fund services and securities services segment, carried by higher interest rates than in the year-ago period and only marginally smaller cash balances. Derivatives trading showed a mixed quarter due to divergent volatility backdrops. Compared with the heightened uncertainty surrounding the banking stress in the US and consolidation of the Swiss banking market at the beginning of last year, equity derivatives declined 21% as volatility returned toward its long-term average. Fixed income remained flat, aided by the anticipation of potential rate cuts. On the other hand, commodities enjoyed greater volume as power prices declined, lifting revenue by 18% in this subsegment. Operating expenses increased 4%, again after excluding SimCorp, which is a good development considering the exchange group is currently investing in cost synergies and therefore front-loading expenses. We maintain our EUR 201 per-share fair value estimate and wide moat rating.