LSE helped by market volatility

The London Stock Group will reveal its third-quarter results on 22 October, and the sale of the asset management unit from Russell Investments will help the firm focus on the index business.

London Stock Exchange
Source: Bloomberg

The London Stock Exchange had a strong start to the year, and profits jumped by 27% in the first six months and the volatility in the financial markets – due to the latest round of the Greek debt crisis – helped trading volumes. The volatility surrounding the Chinese currency devaluation will be included in the latest update from the company, and trading volumes jumped last August through early September. The possibility of a US rate hike at the end of the year – or early next week – will keep traders on their toes which will assist the LSE.

The LSE spent a lot of time and money on acquiring the US-based Russell Investments, and the Index business has proved to be successful. The LSE has agreed to sell-off the asset management division of Russell Investments in order to focus on the index business. The sale price was approximately in the region as what LSE paid for it day one, but it wasn’t as high as some market analysts anticipated. The LSE got what it wanted from the business and its time will now be devoted to expanding the FTSE-Russell operation.

The LSE will announce its full year figures in March 2016, and traders are expecting revenue of £2.3 billion and adjusted net income of £401 million. These forecasts represent a 66% jump in revenue and a 22% drop in adjusted net income. The firm will also reveal its second-half numbers on the same date, and dealers are anticipating revenue of £927 million and adjusted net profit of £291 million. This compares with the first-half revenue and adjusted net income of £1.2 billion and £164 million respectively.

Investment banks are bullish on London Stock Exchange, and out of the 15 recommendations, eight are buys, six are holds, and one is a sell. The average target price is £27.76, which is 13% above the current price.

LSE shares have been in an upward trend since November 2013, and the first target will be £27.25. Beyond that dealers will look to the psychological level of £30. Any pullbacks will provide an opportunity to buy, and support will be found at £22.65, and the £20.40 region. 

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