Analysts from both Australia and the US are predicting that Macquarie Group’s (ASX:MQG) revenue will benefit from financial market volatility and a lower Australian dollar. Analysts believe the company’s momentum will continue and post a strong profit report next month on 8 May. A Bloomberg survey of analysts is predicting profits will come in at the high end of guidance at $1.51bn for the year ending on 31 March. Analysts at the US-based financial company Morgan Stanley have recently lifted the 2016 earnings projections by 9 per cent to $1.91bn. The company cited improved operations across all six of Macquarie’s divisions. US activities were also cited as a major benefit for the company. “The Americas accounted for a higher proportion of Macquarie Capital's revenue than Australia in financial year 2014, and we believe that its position as a niche US middle market player and a global specialist in infrastructure, real estate and resources position it to benefit," the US company said.
Morgan Stanley also underlined 10 factors that could impact the company’s 2016 earnings: growth in assets under management, bumper performance fees, gains on the sales of assets, a potential fall in the company’s compensation ratio, a lower group tax rate, capital deployment by infrastructure funds, US deals, commodity markets, a weaker Australian currency and accretive acquisitions. "The combination of positive net inflows, rising asset values and a weaker $A underpins our forecast of about 26 per cent growth in assets under management," analysts at Morgan Stanley said. Despite the positive sentiment from US institutions, Macquarie Group faces some headwinds in Australia. Government regulatory agencies are attempting to inhibit the fast-growing investor loan market and corporate regulators have criticised the company’s private wealth operations. The company’s chief executive is also set to appear before a Senate committee later this month to answer questions regarding the accuracy of financial advice.
Shares of MGQ are down 63c, or .77 per cent, at $81.61 per share around 2:55pm on Friday. MGQ has advanced 45.80 per cent in the last 12 months and 40 per cent so far this year.
Author: Tim Morris
Apr 17, 2015
Having studied Commerce and Science at the University of New South Wales, Tim began his career in an analytical capacity with Wise-owl. Tim has conducted over 500 corporate valuations and appraisals, specialising in pre revenue assets and emerging markets. For the last five years, his Equity Capital Market insights have been featured as part of a weekly column in The Australian and regularly features on Sky News, CNBC, ABC and Bloomberg TV.