Merrill Lynch Resumes Coverage on Financial Exchanges (CBOE, ICE, NDAQ)

In a research report sent to investors on Tuesday morning, the research team at the Merrill Lynch unit of Bank of America

announced that it was resuming coverage on publicly traded financial exchanges IntercontinentalExchange

and Nasdaq OMX Group

, which it rated at Buy, as well as CBOE Holdings

, which it reinstated with a Neutral rating.

This Chicago-based operator of markets for the trading of listed options contracts has a market capitalization of about $3 billion. Its dividend yield is near 1.7 percent, and the price-to-earnings (P/E) ratio is higher than the industry average. The long-term earnings per share (EPS) growth forecast is more than 11 percent. But note that the return on equity is more than 65 percent and the return on investment is about 56 percent. The number of CBOE shares sold short as of the January 31 settlement date represents less than six percent of the total float. That is the lowest level of short interest since last July. Only one of the 17 analysts who follow the stock and were polled by Thomson/First Call recommend buying the shares, while 15 of them rate the stock at Hold. The Merrill Lynch price target represents less than three percent potential upside over the current share price, and it also is a little less than the 52-week high reached last week. The share price has risen more than 15 percent since the beginning of the year, despite pulling back a bit in the past week. Shares are trading about 25 percent higher than a year ago though. And the stock has outperformed the Down Jones Industrial Average and the S&P 500 over the past six months.

This operator of regulated global markets and clearing houses is headquartered in Atlanta, and it sports a market cap near $11 billion. Its long-term EPS growth forecast is just short of 12 percent, but the P/E ratio is higher than the industry average. The operating margin is near the industry average, and the return on equity is more than 16 percent. Note that the short interest was more than 12 percent of the float at the end of January, after jumping more than 28 percent from the previous period. The number of shares sold short has been rising since October. However, the consensus recommendation of the 17 analysts surveyed is to buy shares, and it has been for the past three months. Their mean price target, or where analysts expect the share price to go, is about four percent higher than the current share price. But the Merrill Lynch price target represents more than 11 percent potential upside. The share price reached a new multiyear high last week, and it is more than 20 percent higher year to date, despite pulling back about three percent in the past week. Over the past six months, the stock has outperformed competitor CME Group

, as well as the broader markets.

This $5.1 billion market cap company provides trading, clearing, exchange technology, regulatory and securities listing worldwide. Its dividend yield is about 1.7 percent. The return on equity is only about seven percent, but the operating margin is greater than that of NYSE Euronext

. The forward earnings multiple is lower than the industry average P/E ratio, and the long-term EPS growth forecast is more than 13 percent. The short interest is about three percent of Nasdaq OMX's float. That is the lowest number of shares sold short since October. Eight of the 17 analysts surveyed recommend buying shares, and none recommends selling. The Merrill Lynch price target is about eight percent higher than the current share price. Shares have not seen that level since September of 2008. The share price is 34 percent higher than six months ago, though shares have met resistance above $31 for the past two weeks. This stock also has outperformed CME Group, as well as the broader markets, over the past six months.