London Stock Exchange Group plc (LSEG) Ordinary 6,79/86p
85.00p
(0.79%)
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HL comment (1 May 2025)
No recommendation - No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.
LSEG’s underlying revenue grew by 7.8% in the first quarter. The growth was broad-based with markets providing the biggest contribution against a volatile backdrop. Trading in financial instruments remained elevated into April.
Management expressed confidence in its prior guidance with underlying growth of 6.5-7.5% expected for the full year.
£245mn of the £500mn buyback program has now been completed.
The shares were flat in early trading.
Our view
First quarter trading didn’t throw up too many surprises. Management sounded relatively confident that they have a diverse enough revenue mix to push through the volatile environment. Perhaps more importantly, they aren’t seeing any changes in consumer behaviour either.
LSEG is more than just a stock exchange. It’s a global leader in financial data and technology. After buying Refinitiv in 2021, a major data and analytics business, LSEG now earns most of its revenue from providing tools and services that financial professionals rely on daily.
The company also benefits from its diversified operations. In addition to data and analytics, LSEG generates revenue from services like clearing and settlement, which help ensure that financial transactions are completed smoothly. This variety of income streams makes LSEG’s business more resilient during market ups and downs.
There’s been a push of late to boost profitability, and the results are starting to bear fruit. Margins are expanding and that’s helping top-line growth drop down into profit and cash. We were pleased to hear management reiterate these efforts into the new year, with the guided £2.4bn free cash flow figure expected to have upside.
The balance sheet is in decent shape, with scope for some add-on acquisitions but we don’t expect any major acquisitions anytime soon. In the meantime, its supporting increased shareholder returns, though nothing is guaranteed.
Looking ahead, LSEG is expected to keep growing as it integrates new technology like AI and expands its offerings. Its focus on cloud-based solutions and automation are helping financial institutions save time and money. Plus, the partnership with Microsoft is starting to come to life, with LSEG’s analysis products integrated into programs like Excel and Teams increasing their appeal.
As a major player in global finance, LSEG faces some challenges. The financial industry is heavily regulated, so changes in rules could impact its business. The company also relies on cutting-edge technology, which requires constant investment to stay ahead.
We think LSEG is an attractive business well placed to benefit from growing trends around the electronification of trading, embedding tech into capital markets, and growth in demand for data analysis. But some of that has already been priced in, and if it wants to continue bridging the valuation gap to US peers, it needs to deliver, and there are no guarantees.
London Stock Exchange Group key facts
Forward price/earnings ratio (next 12 months): 27.8
Ten year average forward price/earnings ratio: 25.0
Prospective dividend yield (next 12 months): 1.3%
Ten year average prospective dividend yield: 1.4%
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.
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