London Stock Exchange Group plc (LON:LSEG) came out with its yearly results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. It looks like a pretty bad result, all things considered. Although revenues of UK£8.4b were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 54% to hit UK£1.38 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. 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 London Stock Exchange Group
Taking into account the latest results, the most recent consensus for London Stock Exchange Group from 14 analysts is for revenues of UK£8.71b in 2024. If met, it would imply a satisfactory 3.9% increase on its revenue over the past 12 months. Per-share earnings are expected to jump 63% to UK£2.30. In the lead-up to this report, the analysts had been modelling revenues of UK£8.69b and earnings per share (EPS) of UK£3.56 in 2024. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.
It might be a surprise to learn that the consensus price target was broadly unchanged at UK£102, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. Currently, the most bullish analyst values London Stock Exchange Group at UK£115 per share, while the most bearish prices it at UK£81.00. 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 London Stock Exchange Group shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that London Stock Exchange Group’s revenue growth is expected to slow, with the forecast 3.9% annualised growth rate until the end of 2024 being well below the historical 34% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 2.7% annually. So it’s pretty clear that, while London Stock Exchange Group’s revenue growth is expected to slow, it’s still expected to grow faster than the industry itself.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for London Stock Exchange Group. Fortunately, they also reconfirmed their revenue numbers, suggesting that it’s tracking in line with expectations. Additionally, our data suggests that revenue is expected to grow faster than the wider industry. The consensus price target held steady at UK£102, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn’t be too quick to come to a conclusion on London Stock Exchange Group. Long-term earnings power is much more important than next year’s profits. We have forecasts for London Stock Exchange Group going out to 2026, and you can see them free on our platform here.
You should always think about risks though. Case in point, we’ve spotted 1 warning sign for London Stock Exchange Group you should be aware of.
Valuation is complex, but we’re helping make it simple.
Find out whether London Stock Exchange Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.
