Citi upgrades LSE, raises target price
Financial services group London Stock Exchange’s steady earnings growth, in an environment where most of its peers have suffered earnings downgrades, has seen its stock significantly outperform its peers.
FTSE 100
7,895.85
16:59 19/04/24
London Stock Exchange Group
8,984.00p
17:15 19/04/24
On top of that track record, analysts at Citi expect the earnings momentum from the company’s high-growth businesses, such as LCH Clearnet and FTSE, to continue. As well, the group's strategic review should see LSE deciding to sell Russell’s Investment Management business, with the remainder of the unit set to be earnings enhancing.
Analysts Nese Guner, Haley A Tam and Abhijeet Sakhare forecast an annual compound rate of earnings growth for LSE of approximately 11% in the fiscal years running from 2014 to 2017.
The funds from the above asset sale, which is expected to close by the end of fiscal year 2015, will be deployed towards reducing its £600m of debt, with the group still being in a position to return between £500-750m of capital to shareholders - even as it continues to meet its leverage ratio.
In line with the earnings upgrades, and on the basis of a 2015 price-to-earnings multiple of approximately 16, the target price on the shares has been raised to 2,400p.
Citi’s recommendation has likewise been improved, to ‘buy’ from ‘neutral’.