These Analysts Hung Out With CME Group Management; Here's What Happened

Jefferies commented on CME Group Inc CME Monday following a meeting with management. The firm maintained a Buy rating and raised its price target from $97 to $104.

Analysts led by Daniel T. Fannon noted that while volumes moderated over the past week, "the backdrop of uncertainty and volatility across asset classes remains."

Fannon anticipated that interest rates would be "the primary driver of growth going forward," however the rebound in energy represented a positive mix shift for the company's overall Rate Per Contract (RPC).

The analysts noted that while expenses returned to a low single digit growth rate in 2016, it was expected that margin expansion would continue. "As the company transitions out of the investment phase it has been in over the last several years, we believe operating margins will expand to 60.8 percent in 2015 and 63.2 percent in 2016 vs 56.8 percent in 2014."

The energy RPC was expected to stabilize and possibly improve "as the company recently reduced some of the market making incentives it was providing for most of 2014," while an "increased contribution from other asset classes beyond interest rates would be a positive to the firm's overall RPC," according to Fannon.

Risks to the $104 price target included "protracted declines in trading volume, increased competition, and adverse regulatory changes."

Fannon concluded that year-to-date trends had been strong and the analysts believed the macro backdrop remained conducive for continued volume strength while "longer-term trends such as globalization, options growth and the transformation of the OTC markets" remained a positive tail wind.

CME Group recently traded at $95.16, up 0.53 percent.