Macquarie (ASX:MQG) share price gains 6% despite lower second half forecast

Macquarie shares have shot out of the starting blocks on Wednesday.

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The Macquarie Group Ltd (ASX: MQG) share price has stepped into the green from the opening of trade on Wednesday.

Macquarie shares are on the move after the company provided an update on its “short-term” outlook at the Jeffries Asia Forum.

Let’s investigate further.

What did Macquarie announce?

Macquarie advised it expects 1H FY22 results to be “slightly down on 2H FY21”.

The investment bank provided several pointers as to why it anticipates weaker earnings in the first half of FY22.

Firstly, the group’s first-half result in FY22 includes the Macquarie Infrastructure Corp (NYSE: MIC) disposition fee in Macquarie Asset Management.

The bank also anticipates base fees associated with Macquarie Asset Management to be “broadly in line” with last year. This excludes the Waddell & Reed acquisition, however.

In fact, it doesn’t expect the Waddell & Reed acquisition to “provide a meaningful net profit contribution in FY22” due to “integration and one off costs”.

Net “other” operating income is also tipped to come in weaker in 1H FY22, due to “significant one off items in FY21” in Macquarie Asset Management.

What else did Macquarie add?

In its banking business, Macquarie believes competition amongst peers will “continue driving margin pressure”.

The bank also forecasts higher expenses for this segment, to support growth and investment.

Despite this, greater transaction activity is expected to continue in FY22 for Macquarie Capital, partially offsetting the softened forecasts in other segments.

The bank’s commodities income is also “expected to be down following a strong FY21”. Although it does see opportunities if volatility remains in commodities markets.

However, its commodities and global markets segment is still performing better than anticipated. There is also the disposal of the UK commercial and industrial smart meter portfolio that will impact results here, as per the release.

Touching on its “short term outlook”, Macquarie said: “We continue to maintain a cautious stance, with a conservative approach to capital, funding and liquidity that positions us well to respond to the current environment”.

Aside from its short-term forecasts, the company added some colour to its “medium term” outlook.

Here Macquarie believes it remains “well positioned to deliver superior performance in the medium term”. A stark contrast to its near term forward estimates.

Investors appear to have bought in on the bank’s medium-term outlook, potentially choosing to ignore the short term “noise”.

As such, the Macquarie share price has climbed 6% into the green from the opening of trade today and is now trading at $181.70.

Macquarie Bank share price snapshot

The Macquarie Bank share price has climbed 30% this year to date, extending the gain of the last 12 months to 40%.

These results have both outpaced the S&P/ASX 200 index (ASX: XJO)’s return of around 25% over the past year.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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