CME Group Stock: Is CME Underperforming the Financial Sector?

CME Group Inc. (CME), headquartered in Chicago, Illinois, operates contract markets for the trading of futures and options on futures contracts. Valued at $93.4 billion by market cap, the company offers futures and options products based on interest rates, equity indexes, foreign exchange, agricultural commodities, energy, and metals, and more. It facilitates trading on its trading floors, electronic platform, and through privately negotiated transactions that it clears.

Companies worth $10 billion or more are generally described as “large-cap stocks.” CME effortlessly fits that bill, with its market cap exceeding this mark, underscoring its size, influence, and dominance within the financial data & stock exchanges industry. CME cements its leadership in the derivatives market with a diverse range of trading products across interest rates, equity indexes, foreign currencies, and commodities. This broad portfolio attracts a wide customer base, granting exclusive rights to trade and clear S&P futures contracts, further solidifying its competitive advantage.

Despite its notable strength, CME slipped 23.9% from its 52-week high of $329.16, achieved on Mar. 3. Over the past three months, CME stock has declined 23.3%, underperforming the State Street Financial Select Sector SPDR ETF’s (XLF) marginal gains during the same time frame.

Shares of CME fell 8.3% on a YTD basis and dipped 13.8% over the past 52 weeks, underperforming XLF’s YTD losses of 6% and marginal returns over the last year.

To confirm the bearish trend, CME has been trading below its 200-day moving average since late May. The stock has been trading below its 50-day moving average since late March, with small fluctuations. 

On Apr. 22, CME shares closed up marginally after reporting its Q1 results. Its adjusted EPS of $3.36 fell short of Wall Street expectations of $3.37. The company’s revenue was $1.88 billion, missing Wall Street forecasts of $1.91 billion.

In the competitive arena of financial data & stock exchanges, Intercontinental Exchange, Inc. (ICE) has lagged behind CME, with a 12.1% downtick on a YTD basis and 21% losses over the past 52 weeks.

Wall Street analysts are reasonably bullish on CME’s prospects. The stock has a consensus “Moderate Buy” rating from the 18 analysts covering it, and the mean price target of $309.20 suggests a potential upside of 23.4% from current price levels.