On Wednesday, Keefe, Bruyette & Woods reiterated its Market Perform rating for CME Group (NASDAQ:CME), maintaining a price target of $257.00. Their analysis highlighted CME’s robust operational performance, with the company’s average daily volume (ADV) for February reaching 33.1 million contracts, pushing the total futures ADV for Q1 2025 to 29.2 million. This figure is tracking 11% above the firm’s initial estimates for the quarter. The company’s solid performance is further reflected in a 9.9% year-over-year revenue growth.
However, Keefe pointed out that the rolling realized price per contract (RPC) for the three months ending January came in lower than expected, particularly in the Energy sector. This was partly due to changes in transaction fees implemented in February, which had yet to be reflected in the rolling 3-month RPC data through January.
Strong Q1 Performance Expected
Keefe has set its earnings per share (EPS) estimate for CME Group’s Q1 2025 at $2.60, in line with consensus among analysts. If current trends in volumes and RPCs persist through the rest of the quarter, there’s potential for earnings to exceed consensus by $0.18. CME’s consistent dividend yield of 4.29% further adds to its appeal, with the company having paid dividends for 23 consecutive years.
Despite these positive indicators, Keefe’s price target suggests a slight overvaluation of CME stock at its current level, with a P/E ratio of 26.12. InvestingPro’s Fair Value analysis supports this, indicating the stock is somewhat overvalued.
Analyst Upgrades Reflect Confidence in CME’s Growth
In addition to Keefe’s analysis, other analysts have adjusted their price targets for CME Group. UBS has raised its price target to $290, maintaining a Buy rating, citing expectations for strong trading volumes and fee hikes to drive future revenue growth. Following CME’s strong earnings, Keefe slightly revised its target to $257, reflecting the company’s better-than-expected performance, with earnings exceeding estimates by $0.06 per share due to higher revenues and lower tax rates.
Similarly, RBC Capital Markets raised its price target to $269, driven by higher earnings estimates and an elevated earnings multiple, though it maintained a Sector Perform rating due to tough market comparisons. Citi analysts, noting CME’s record ADV in February of 33.1 million contracts, have increased their target to $265. The strong performance across metals and agricultural commodities contributed to the bullish outlook, although Citi maintains a Neutral rating, citing limited upside potential from current levels.
Volatility Supports CME’s Strategic Position
Despite these positive updates, analysts have expressed caution over CME’s stock valuation, considering its already high price relative to earnings. However, CME’s strategic positioning, supported by its diverse asset offerings and dominance in the futures market, positions the company to benefit from ongoing market volatility. In light of recent financial results and market developments, CME Group remains a strong contender in the derivatives market, though market volatility could continue to impact its short-term stock performance.
