Investors in Macquarie Group Limited (ASX:MQG) had a good week, as its shares rose 6.9% to close at AU$135 following the release of its half-yearly results. Sales of AU$5.5b surpassed estimates by 5.6%, although statutory earnings per share missed badly, coming in 49% below expectations at AU$1.35 per share. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus, from the ten analysts covering Macquarie Group, is for revenues of AU$11.3b in 2021, which would reflect a small 2.3% reduction in Macquarie Group's sales over the past 12 months. Statutory earnings per share are forecast to tumble 24% to AU$6.01 in the same period. Before this earnings report, the analysts had been forecasting revenues of AU$11.1b and earnings per share (EPS) of AU$6.76 in 2021. So there's definitely been a decline in sentiment after the latest results, noting the real cut to new EPS forecasts.
Despite cutting their earnings forecasts,the analysts have lifted their price target 5.3% to AU$138, suggesting that these impacts are not expected to weigh on the stock's value in the long term. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Macquarie Group analyst has a price target of AU$152 per share, while the most pessimistic values it at AU$120. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with the forecast 2.3% revenue decline a notable change from historical growth of 5.4% 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 4.7% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Macquarie Group is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Macquarie Group's revenues are expected to perform worse than 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 Macquarie Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Macquarie Group analysts - going out to 2025, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Macquarie Group that you should be aware of.
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. 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.
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