Earnings Update: Hong Kong Exchanges and Clearing Limited (HKG:388) Just Reported And Analysts Are Boosting Their Estimates

Last week saw the newest annual earnings release from Hong Kong Exchanges and Clearing Limited (HKG:388), an important milestone in the company's journey to build a stronger business. Results were roughly in line with estimates, with revenues of HK$22b and statutory earnings per share of HK$10.29. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Hong Kong Exchanges and Clearing

Taking into account the latest results, the most recent consensus for Hong Kong Exchanges and Clearing from 19 analysts is for revenues of HK$24.8b in 2025. If met, it would imply a decent 11% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to accumulate 8.8% to HK$11.24. Before this earnings report, the analysts had been forecasting revenues of HK$23.5b and earnings per share (EPS) of HK$10.66 in 2025. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.

With these upgrades, we're not surprised to see that the analysts have lifted their price target 13% to HK$401per share. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Hong Kong Exchanges and Clearing at HK$450 per share, while the most bearish prices it at HK$325. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Hong Kong Exchanges and Clearing shareholders.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Hong Kong Exchanges and Clearing's rate of growth is expected to accelerate meaningfully, with the forecast 11% annualised revenue growth to the end of 2025 noticeably faster than its historical growth of 3.7% p.a. over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 13% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Hong Kong Exchanges and Clearing is expected to grow at about the same rate as the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Hong Kong Exchanges and Clearing's earnings potential next year. There was also an upgrade to revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Hong Kong Exchanges and Clearing. Long-term earnings power is much more important than next year's profits. We have forecasts for Hong Kong Exchanges and Clearing going out to 2027, and you can see them free on our platform here.

We also provide an overview of the Hong Kong Exchanges and Clearing Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.