London Stock Exchange Group PLC (LSE:LSEG) is set to announce its second-quarter financial results on 1 August, with UBS highlighting five key areas of focus.
Broadly speaking, the results are anticipated to show an 8.7% year-on-year revenue growth, primarily driven by Tradeweb revenues.
However, UBS has lowered its 2024-26 earnings per share (EPS) estimates for LSEG by 3%, attributing about 50% of the decline to changes in spot foreign exchange rates.
- Annual subscription value: UBS forecasts that LSEG's ASV will remain flat at 6%, but there are risks of a downside, particularly if the company engages in more all-access or enterprise-wide contracts that might offer initial pricing discounts.
- FTSE Russell: FTSE subscription revenues are a significant source of income for LSEG. FTSE Russell, known for its indices, experienced a slowdown in subscription growth from 11.5% in 2023 to 6.5% in the first quarter of 2024. UBS predicts a 9% year-on-year growth in FTSE Subscription revenues in the second quarter, which is slightly below market expectations.
- Tradeweb: UBS's outlook for Tradeweb, which is a global operator of electronic marketplaces for rates, credit, equities, and money markets, is more optimistic than the consensus, forecasting higher revenues that will drive overall growth.
- Margins: UBS's forecast for LSEG's half-year 2024 EBITDA margin is 48%, a slight increase from 47.7% in the same period of the previous year.
- Commentary: Commentary from the new Chief Financial Officer, Michel Alain Proch, will be closely watched by UBS analysts as it will be his first earnings call since joining LSEG.
“While we view the long-term opportunities for LSEG attractively, particularly on a 3-5 year time horizon, we expect a lack of positive catalysts for the remainder of 2024 will
result in the shares remaining range-bound,” said analysts.
“Given LSEG's strong multiple expansion in 2023 (its forward P/E multiple increased from 20x to 25x), we think we need meaningful upgrades to cons(ensus) EPS before LSEG's shares can benefit from further multiple expansion.”
The stock was given a neutral rating with a 10,100p price target against a 9,328p publication price.