A Quick Look At Lloyds Banking Group's EPS Forecasts

Published in Company Comment on 19 December 2012

How might earnings at Lloyds Banking Group (LSE: LLOY) change in the years to come?

It's always worth keeping an eye on the earnings forecasts for your favourite companies, especially if you use forward price-to-earnings (P/E) ratio to gauge when to buy and sell your shares.

You never know, if City brokers have been revising their projections of late, your investments may not be as cheap -- or expensive -- as you think!

Today I'm looking at the earnings per share (EPS) forecasts for Lloyds Banking Group (LSE: LLOY) (NYSE: LYG.US), the FTSE 100 (UKX) high-street bank. All my figures are courtesy of S&P Capital IQ.

The consensus for 2012 is for earnings per share of 2p, which puts the 47p shares on a lofty forward P/E of 23.

The estimates also suggest earnings may rise to 4p per share for 2013 and then climb to 6p per share in 2014 before flattening off at that level the year after.

The data from S&P Capital IQ also indicates Lloyds Banking Group's revenues may struggle to reach the levels attained in 2011. They are expected to fall to £18.5b and remain largely unchanged for three years. Revenues could then climb to £19.1b in 2015.

All told, the forecasts aren't great, with earnings essentially predicted to go nowhere after 2014. But then again, that P/E of 23 looks like the market is hoping the forecasts may be too pessimistic.

Whether these projections make Lloyds Banking Group a buy, a hold or a sell is, of course, up to you. To put the company's multiple into perspective, the FTSE 100 at 5,967 trades on a P/E of around 11.

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> David does not own any share mentioned in this article.

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BigJC1 20 Dec 2012 , 9:09am

All told the forecasts aren't great .....
EPS growing 100% next year and 50% the year after that looks pretty good to me. If it was a technology business doing that sort of EPS growth you'd be frothing at the mouth !!

Revenues will stabalise or fall because the business has sold many none core divisions. Do not confuse revenue with profits.

Hannibalis 20 Dec 2012 , 3:54pm

Haha "If you already have X in your portfolio..." - now that's boilerplate.

Seriously though, what is behind LLOY's 100% rise this year?

BigJC1 20 Dec 2012 , 5:30pm

A growing realisation that it has a great UK market position, great customer base, great resources, great balance sheet, great core profits, great cost reductions, great divestments, great provisions. In short it's in a great position. As soon as it starts paying a dividend stream expect a second surge to over a £1.

The really interesting price acceleration will be when the fines stop and the provisions unwind.

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