Why Credit Suisse Cut Targets At CME Group

In a report published Monday, Credit Suisse analysts maintained a Neutral rating on

, while reducing the price target from $95 to $88, following the company's weak start to 2Q. CME has a diverse product set, best-in-class distribution clearing platforms and strong free cash flow generation prospects, but the recent pullback in activity, mostly within interest rates and equities indicates lower volume for the company in the near future. "Specifically, CME volumes are tracking down 13% yr/yr and down 32% from robust first quarter levels. We believe a pushback in market expectations for the timing of the first Fed Funds hike has dampened volatility and driven volumes lower," the analysts said. Despite the muted near-term activity trends, the longer term prospects for interest rate volumes at CME remain positive. "On a positive note, Energy activity remains resilient as the oil curve in contango is likely supporting volumes; L/T indicators also point to robust franchise health. That said, with consensus estimates cuts likely coming, an already full valuation and tough comps in the back half we see some headwinds for CME shares," the analysts stated. The EPS estimates for 2015, 2016 and 2017 have been reduced from $3.69 to $3.65, from $4.10 to $4.00 and from $4.25 to $4.20, respectively.