MQG: Earnings Recovery Will Eventually Strengthen Despite Extended Trough Concerns

Analysts have trimmed their price target on Macquarie Group, cutting it by A$16.92 to A$207.58 as they factor in expectations for a broader earnings trough and a slower recovery than the market consensus.

Analyst Commentary

Street research on Macquarie Group highlights a cautious tone overall, with a focus on how a longer earnings trough and tempered recovery expectations affect valuation and growth assumptions.

Bullish Takeaways

• Bullish analysts see Macquarie's diversified business model as providing a platform for eventual earnings recovery, even if the pace is slower than previously anticipated.
• Some investors view the reduced price target as resetting expectations to a more achievable level, potentially limiting downside risk if execution on cost control and capital allocation improves.
• Long term growth opportunities in infrastructure and energy transition assets are still seen as intact, supporting the case that current earnings weakness may not fully reflect the franchise value.
• Valuation could become more compelling if the share price adjusts faster than underlying fundamentals, creating upside optionality as the cycle normalises.

Bearish Takeaways

• Goldman Sachs and other bearish analysts argue that the earnings trough is broader than a standard cyclical downturn, warranting a lower valuation multiple and a Sell stance.
• The anticipated slower recovery versus market consensus raises concern that current earnings forecasts may still be too optimistic, increasing the risk of further estimate cuts.
• Execution risk is seen in Macquarie's ability to protect margins and returns in a weaker deal making and asset realisation environment, particularly across capital markets focused businesses.
• Bearish analysts caution that if the macro backdrop remains subdued, the group could face prolonged pressure on fee income and performance fees, limiting near term catalysts for re rating.

What's in the News

• Macquarie Group reportedly held exploratory talks earlier this year to acquire Carlyle Group, with discussions ending after Carlyle's turnaround under CEO Harvey Schwartz gained investor support (Semafor).
• Macquarie declared an ordinary interim dividend of AUD 2.80 per share for the six months ended September 30, 2025, payable on December 17, 2025, reinforcing its capital return profile.
• The group extended the duration of its share buyback plan to October 31, 2026, which signals ongoing balance sheet flexibility and willingness to return surplus capital.
• Macquarie is believed to be working toward a break up of its A$2.5 billion Paraway Pastoral Company portfolio, with plans to sell assets in pieces amid strong interest from superannuation, Canadian pension and Middle Eastern funds.
• LA Semiconductor engaged Macquarie to market and sell its large wafer fabrication facility in Pocatello, Idaho, which highlights Macquarie's role in strategic transactions across the semiconductor sector.

Valuation Changes

• Fair Value Estimate remains unchanged at A$224.48 per share, indicating no revision to the intrinsic value despite the softer outlook.
• The Discount Rate has risen slightly from 9.23 percent to 9.28 percent, reflecting a modest increase in perceived risk or required return.
• Revenue Growth has nudged higher from 5.82 percent to 5.85 percent, suggesting a marginally more optimistic top line trajectory.
• The Net Profit Margin has inched up from 24.42 percent to 24.44 percent, pointing to a slightly improved profitability profile over the forecast horizon.
• The future P/E multiple is effectively unchanged at around 20.9 times earnings, signifying a stable valuation framework for forward earnings.