Last Update 11 Dec 25

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.

Strategic investments in asset management and digitization are expected to drive revenue growth and enhance operational efficiencies.
Expanding in Asia and focusing on green projects might boost revenue, despite current competitive and volatile market conditions.
Margin pressures, foreign exchange impacts, and new investments may hinder Macquarie Group's revenue, profitability, and financial predictability across various segments.

Catalysts

About Macquarie Group

Provides diversified financial services in Australia, the Americas, Europe, the Middle East, Africa, and the Asia Pacific.What are the underlying business or industry changes driving this perspective?

Macquarie Group is investing heavily in its asset management business, focusing on performance fees and fundraising, which should contribute to revenue growth and improve earnings as the market conditions align with these strategic moves.
The continued investment in digitization within the Banking and Financial Services division is expected to drive operational efficiencies, potentially benefiting net margins over time by reducing costs and enhancing scalability.
Macquarie Capital's growing private credit portfolio, alongside increasing activity in M&A and asset realization, could positively impact earnings and revenue growth as markets recover, providing more opportunities for capital deployment.
The strategic emphasis on global growth in Commodities and Global Markets, particularly in Asia, promises to expand client numbers and potentially boost revenue, despite currently subdued trading conditions due to competition and market volatility.
The business is positioned to benefit from potential performance fees and asset realization gains in key investment areas like data centers and green energy projects, potentially impacting earnings growth and improving return on equity as these assets mature.

Macquarie Group Earnings and Revenue Growth

Macquarie Group Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Macquarie Group's revenue will grow by 5.3% annually over the next 3 years.
Analysts assume that profit margins will increase from 20.7% today to 24.0% in 3 years time.
Analysts expect earnings to reach A$4.9 billion (and earnings per share of A$12.86) by about September 2028, up from A$3.6 billion today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.6x on those 2028 earnings, down from 22.1x today. This future PE is about the same as the current PE for the AU Capital Markets industry at 21.6x.
Analysts expect the number of shares outstanding to grow by 0.2% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.05%, as per the Simply Wall St company report.

Macquarie Group Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Macquarie Group's assets under management decreased by 2% due to unfavorable foreign exchange movements and outflows in equity strategies, potentially impacting future revenue growth.
Competitive dynamics in the Banking and Financial Services segment are creating margin pressure, likely affecting net margins as the market continues to drive these pressures.
Commodities and Global Markets experienced lower client activity due to a benign market environment, resulting in decreased demand. This reduced activity can negatively impact revenue and earnings in this sector.
The Macquarie Capital segment saw a decline in net profitability due to new investments, which can drag on near-term earnings and potentially affect return on equity until those investments mature.
Performance fees in Macquarie Asset Management are subject to market conditions, with potential lumpy income recognition impacting revenue streams and financial predictability over time.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of A$221.239 for Macquarie Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$250.0, and the most bearish reporting a price target of just A$195.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$20.2 billion, earnings will come to A$4.9 billion, and it would be trading on a PE ratio of 21.6x, assuming you use a discount rate of 9.0%.
Given the current share price of A$216.82, the analyst price target of A$221.24 is 2.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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