Macquarie share price races higher after Q3 result shocks analysts

Analysts are scrambling to upgrade their earnings estimates at Macquarie's latest update…

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The Macquarie Group Ltd (ASX: MQG) share price is racing higher on Tuesday morning.

At the time of writing, the investment bank's shares are up 2% to $193.09.

Why is the Macquarie share price racing higher?

Investors have been bidding the Macquarie share price higher today following the release of the company's third quarter update.

While Macquarie hasn't provided any actual figures, it revealed that its profits were up slightly up for the nine months to 31 December compared with the prior corresponding period.

This has been driven by strong performances from its markets-facing businesses, which offset softer performances from its annuity-style businesses.

Broker reaction

It isn't just investors that have responded positively. The team at Goldman Sachs has looked over the result and labelled it "very strong" thanks to its Commodities and Global Markets (CGM) business.

In fact, the broker believes that this result implies that the company has already achieved approximately 97% of its FY 2023 profit estimate with a quarter still to come. Goldman commented:

Macquarie Group has released its 3Q23 trading update, in which they highlight that NPAT in FY23 YTD was slightly up on FY22 YTD. We estimate this implies a FY23 YTD NPAT of c. A$4.4 bn, which is 97% of our current FY23 NPAT forecast of A$4.6 bn.

In light of this, the broker believes that Macquarie could be on track to beat its FY 2023 estimate by $500 million. It explained:

CGM is run-rating significantly ahead of our forecasts, noting that the 3Q23 CGM profit contribution was substantially up on the 1H23 contribution. If we assume this implies a 25% increase, this implies a YTD contribution from CGM of c. A$4.5 bn.

Noting that last year's (FY22) CGM performance implies a net profit contribution of c. A$975 mn / quarter for the division, this would imply an FY23 CGM profit contribution of c. A$5.5 bn, which is A$1.1 bn ahead of our current forecasts. Assuming a c. 50% profit margin, this would imply our current A$4.6 bn FY23E group NPAT may need to increase by as much as c. 12% to c. A$5.1 bn.

The Macquarie share price is now up 16% since the start of the year, as you can see below.

Motley Fool contributor James Mickleboro has no position 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 has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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