UBS is optimistic about the London Stock Exchange Group PLC (LSE:LSEG) (LSEG) as it approaches its third-quarter results on 19 October, with a core bullish thesis fueled by the strengthening US dollar.
The bank has raised LSEG’s 2023-25 earnings-per-share (EPS) estimates by 1-3%, attributing this mainly to the dollar's 7% appreciation against the pound since mid-July.
LSEG, which generates approximately 65% of its underlying earnings in US dollars, is expected to benefit significantly from these currency dynamics.
The anticipated constant-currency year-on-year revenue growth for LSEG is 7.3% in the third quarter, marking a deceleration from the 8.3% reported in the previous quarter.
UBS attributes about 60% of this slowdown to weaker M&A activities and the rest to one-off revenues in post-trade.
Despite this, segment forecasts remain positive, with post-trade, capital markets, and data and analytics expected to grow by 10.7%, 7.7%, and 7.3% respectively.
“Our core thesis for LSEG remains intact as we expect LSEG's revenue growth momentum to continue, leading to an upgrade of its mid-term annual revenue growth outlook to 6-8%, from the current 5-7%,” said UBS.
Retaining a 'buy' rating, the bank has increased its LSEG share price target by 3% to £101 to reflect strong EPS expectations.