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Tuesday, Citi reaffirmed its Neutral stance on Computershare Limited (CPU:AU) (OTC: CMSQY), maintaining an AUD35.00 price target. Trading near its 52-week high of $23.00, the stock has delivered an impressive 41% return over the past year. Computershare’s first-half 2025 diluted earnings per share (EPS) outperformed market expectations, showing a year-over-year increase of 19% to US65.2 cents per share. This result surpassed the Visible Alpha consensus by approximately 6%. The company also revised its full-year 2025 management EPS guidance from an estimated 7.5% increase to a stronger forecast of around 15% growth, considering constant foreign exchange rates. According to InvestingPro, the stock currently appears fairly valued based on its proprietary Fair Value model.
The earnings before interest and taxes (EBIT) for the period reached US$565 million, exceeding the consensus estimate of US$548 million by 3%. Margin income contributed US$394 million and EBIT excluding margin income was US$170 million, both surpassing consensus predictions by US$12 million and US$4 million, respectively. The growth in EPS was propelled by robust transactional revenue in the Plans and Issuer Services segments, particularly notable for a December half. Additionally, fee income from Plans slightly exceeded expectations. InvestingPro data shows the company maintains strong financial health with a GREAT overall score, operating with moderate debt levels and liquid assets exceeding short-term obligations.
The positive financial outcome was further supported by a lower effective tax rate of 24.0%. Computershare’s margin income (MI) forecast has been modestly increased to US$760 million from the previously anticipated US$745 million. The average balance guidance has also been adjusted upwards to a conservative estimate of US$30.2 billion, from an initial US$28.5 billion and a later revision during the annual general meeting to US$29.5 billion. This adjustment reflects the company’s current outlook on expected balances. The company has maintained dividend payments for 31 consecutive years, with a current yield of 3.58%. InvestingPro subscribers can access 12 additional valuable insights about Computershare’s financial health and growth prospects.
In other recent news, Computershare Limited has been the subject of recent adjustments by both Goldman Sachs and Macquarie. Goldman Sachs downgraded Computershare’s stock from Buy to Neutral, despite raising the price target to AUD35.50 from AUD31.00. This revision reflects changes in currency valuation and minor adjustments to earnings estimates. Julian Braganza, an analyst at Goldman Sachs, noted that Computershare has seen a substantial rise in its share price due to favorable macroeconomic factors, including anticipated yields and a robust U.S. dollar.
On the other hand, Macquarie analysts also revised their stance on Computershare, downgrading the stock rating from Outperform to Neutral. However, they increased the price target to AUD34.00 from AUD28.00, driven by valuation concerns and a perceived mismatch between bond yields and the company’s stock price. The analysts highlighted that changes in the interest rate outlook have implications for Computershare’s earnings.
These recent developments underscore the complex interplay between interest rates and stock valuations, especially for financial services firms like Computershare. Both Goldman Sachs and Macquarie’s revisions reflect a neutral view on Computershare’s future price performance, pointing towards the impact of macroeconomic factors on the company’s stock.
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