Deutsche Bank Met With CME Management; Here's What Happened

In a report published Friday, Deutsche Bank analysts maintained a Buy rating on CME Group Inc CME, with a price target of $106, after a meeting with the CFO John Pietrowicz and Head of Investor Relations John Peschier.

The company's share price has declined by 10 percent since mid-March. The analysts view this as a "buying opportunity" and expect the main catalyst to be a pickup in volumes in 2Q from the recent weak levels.

In the report Deutsche Bank noted, "CME mgmt explained much of the recent decline due to the pullback of expected tightening post more dovish FOMC meeting & weak payrolls, combined with typically lighter trading around spring break vacations (April was weakest month in 2014), along with recent pullback in energy volumes."

The analysts expect volumes to recover over the coming weeks with economic data becoming "more important for the Fed liftoff timing" and "market activity increases in earnings season."

The company outlined continued traction in several organic efforts that should provide volume tailwinds, including:

1. futurization of OTC IRS users given more efficient capital usage & leveraging rising OTC IRS clearing position;
2. improving penetration of futures usage outside US;
3. greater cross-sell of energy products via Brent initiatives; and
4. rapid growth in electronic options trading.

Although the weak start in April poses "modest downside revision risk for 2Q," the analysts believe that this is already priced into the stock. Deutsche Bank considers CME to be the "best play on higher market and interest rate volatility into expected oncoming Fed tightening cycle."