SYDNEY (Reuters) – Macquarie Group raised its earnings guidance on Monday, sending stocks to a 12-month high, as the North American energy business’s hefty profits from a winter storm swept Texas and other states.
Macquarie said it expects fiscal 2021 profit to jump by as much as 10%, following warnings two weeks ago that revenues will be “slightly down”.
The energy business unit, which is designed to move large amounts of gas to meet unexpected demand, alone raised the investment bank’s estimated overall return to about A $ 400 million, analysts said.
“Extreme winter weather conditions in North America have significantly increased short-term client demand for Macquarie’s ability to maintain critical physical supplies across the commodity complex,” the company said in a statement.
Macquarie is North America’s second largest gas marketer, after major oil company BP. It purchases natural gas and moves it along pipelines and networks, usually from low-use areas to high-demand markets.
A deadly winter storm that crippled infrastructure and left millions of Texans without electricity forced generators to compete for natural gas supplies, driving up prices sharply in a deregulated market.
Supply difficulties had given Macquarie an unexpected advantage.
“Macquarie appears to be making good use of financial market volatility and dislocation,” Bank of America Securities analysts said in a note, as it raised its earnings forecast for the Sydney-based firm.
Macquarie’s performance last year was hurt by the pandemic, with weak deal-making and worsening economic conditions driving up the cost of impairment.
However, a strong initial public offering of its majority-owned data analytics software business, Nuix, late last year and a refresh in the energy business have helped push its share price back to pre-pandemic levels.
The company, which also operates Australia’s largest asset manager and investment banking business, is bracing for an extra boost from a rebound in local M&A activity this year.
Macquarie shares rose 4.31% to A $ 148.39 early Monday, the highest level in a year, outperforming the broader flat market. Share prices declined slightly in afternoon trading.
Earlier this month, the Sydney-based financial conglomerate had forecast full-year revenue for the group to be “slightly” lower than its 2020 fiscal year.
Macquarie’s Global Commodities and Markets Division accounts for nearly 40% of its group revenue. Analysts have previously raised concerns that the pandemic could erode the division’s profits if high-energy industries shut down.
Reporting by Paulina Duran and Jonathan Barrett; Additional reporting by Shriya Ramakrishnan; Edited by Peter Cooney, Jane Wardell & Shri Navaratnam