Investors in Macquarie Group Limited (ASX:MQG) had a good week, as its shares rose 8.5% to close at AU$105 following the release of its yearly results. Revenues of AU$12b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at AU$7.65, missing estimates by 7.1%. Earnings are an important time for investors, as they can track a company’s performance, look at what the analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the twelve analysts covering Macquarie Group provided consensus estimates of AU$11.8b revenue in 2021, which would reflect a measurable 4.5% decline on its sales over the past 12 months. Statutory earnings per share are expected to sink 14% to AU$6.77 in the same period. Before this earnings report, the analysts had been forecasting revenues of AU$11.8b and earnings per share (EPS) of AU$8.12 in 2021. So there’s definitely been a decline in sentiment after the latest results, noting the real cut to new EPS forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at AU$122, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Macquarie Group at AU$160 per share, while the most bearish prices it at AU$103. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with the forecast 4.5% revenue decline a notable change from historical growth of 5.9% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 6.0% annually for the foreseeable future. It’s pretty clear that Macquarie Group’s revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Macquarie Group. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year’s earnings. At Simply Wall St, we have a full range of analyst estimates for Macquarie Group going out to 2024, and you can see them free on our platform here..
Don’t forget that there may still be risks. For instance, we’ve identified 3 warning signs for Macquarie Group that you should be aware of.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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