On Tuesday, Morgan Stanley analyst Michael Cyprys upgraded CME Group stock from Equal-weight to Overweight, setting a new price target of $301, up from the previous $263. Currently trading at $252.37, with a market capitalization of $91 billion, CME Group shows strong fundamentals. Cyprys highlighted CME Group's (NASDAQ:CME) strong positioning amid prolonged market uncertainty, noting that 80% of the company's revenues come from clearing and transaction fees. The analyst underscored the robust moat CME has around its futures and options on futures complex, which is seen as a significant competitive advantage. According to InvestingPro analysis, the stock is currently trading slightly above its Fair Value, with seven analysts recently revising their earnings estimates upward.
CME Group's stock is considered well-placed to benefit from the current volatile market, as traders and investors gravitate towards the most liquid markets, reinforcing the company's competitive moat. The company's financial stability is evidenced by its impressive 23-year streak of maintaining dividend payments, currently offering a 4.28% yield. This shift is expected to further support CME's valuation multiple. Furthermore, Morgan Stanley anticipates the greatest volume increases in the rates complex, projecting a year-over-year growth of 15% in 2025 and 12% in 2026 for average daily volume (ADV), which is significantly above the five-year historical compound annual growth rate of 7%.
The upgrade comes with an optimistic outlook for CME Group's financial performance, with projections of a 15% increase in volumes in 2025 leading to a 13% rise in top-line revenue and a 12% growth in earnings per share (EPS). The company's recent performance supports this optimism, with revenue growing 9.9% in the last twelve months to $6.12 billion. The firm's defense against market downturns, due to its counter-cyclical and defensive revenue streams, along with a strong balance sheet, were also factors contributing to the positive assessment. For deeper insights into CME Group's financial health and growth potential, InvestingPro subscribers can access the comprehensive Pro Research Report, which includes detailed analysis of the company's competitive position and growth drivers.
In addition to the rating upgrade and price target increase, Morgan Stanley revised its EPS estimates upward by 5% and 7% for 2025 and 2026, respectively. This adjustment is based on an anticipated 7% and 12% increase in revenues, corresponding to the expected growth in ADV of 15% and 11% year-over-year. The analyst's comments reflect confidence in CME Group's ability to navigate and thrive in the current economic climate.
In other recent news, CME Group has reported record-breaking average daily volumes (ADV) in the first quarter of 2025, reaching a new all-time quarterly record of 29.8 million contracts. This 13% year-over-year increase was driven by strong performances across various asset classes, including interest rates, equity indexes, and cryptocurrencies. Notably, the U.S. Treasury complex achieved a quarterly ADV record of 9.2 million contracts. UBS maintained a Buy rating on CME Group with a price target of $290, citing an upward revision in first-quarter 2025 earnings per share (EPS) estimates to $2.78. RBC Capital Markets kept its Sector Perform rating and $269 price target, highlighting a 26.9% year-over-year surge in March trading volumes. Keefe, Bruyette & Woods reiterated a Market Perform rating with a $257 target, noting a 13% increase in first-quarter ADV compared to their estimates. Meanwhile, Raymond James maintained an Outperform rating with a $287 price target, emphasizing the company's strong trading volumes amid volatile market conditions. These developments reflect CME Group's ability to capitalize on market volatility and its robust product offerings.
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