Computershare breaks out to all-time highs on FY23 earnings upgrade

An FY23 guidance upgrade has propelled Computershare (ASX: CPU) to fresh all-time highs, up 6.5% in early trade.

Computershare shares have rallied 37% year-to-date and up 46% in the last 12 months, making it one of the best performing non resource-related stocks in the S&P/ASX 200.

FY23 trading update

Computershare said Group performance for the first four months of FY23 has been 'ahead of expectations, driven by margin income'.

FY23 margin income expectations were upgraded to $800m, up from the $520m guidance provided in August.

For perspective, Computershare operate several business segments including issuer services, mortgage services, employee share plans, business services and margin income. In FY22, margin income generated $186.5m in revenue or 7.15% of Group revenues.

Computershare notes that global interest rates have risen much faster and larger than expected, positioning margin income for 'significant growth'.

Benefits outweigh risks

Computershare flagged several areas that have performed below the expectations set during August reporting season. Most notably:

• US mortgage servicing impacted by rising rates

• Employee share plans' transactional fees impacted by weaker equity markets

• Inflationary pressures continue to be experienced across global group operations

Excluding margin income, Computershare expects the rest of the business to post lower growth.

The company warned about persistently challenging macro conditions, which could see lower year-on-year growth in corporate actions, volatile employee share plan transaction volumes and further cost pressure across all lines of businesses.

Still, the forecasted 430% year-on-year growth in FY23 margin income is expected to strongly offset the above impacts.

Computershare will also receive a full year contribution from its Wells Fargo Corporate Trust acquisition from late 2021. The Corporate Trust segment accounted for 12.9% to Group revenues in FY22 (8 months contribution).

Computershare price chart