Analysts full of praise for Morgan's last result

Westpac's 2007 profit came in well ahead of the expectations of equities analyst, beating consensus forecasts for earnings per share growth by more than one per cent (Westpac delivered 13 per cent growth in EPS versus consensus of 11.9 per cent). Westpac's $1.31 full year dividend was also ahead of expectations (albeit by just one cent).

Bank analysts at investment banks increased forecasts to 2008 earnings per share by around one per cent, although two brokers put through upgrades of two per cent or more.

The 2007 profit produced a more disparate view on Westpac's earnings outlook for 2009. Forecasts for 2009 earnings per share growth were increased an average of just under two per cent. Several brokers increasing their EPS forecasts by up to 3.9 per cent while an equal number held their forecasts as is.

As a result of these upgrades the consensus outlook for Westpac is for 10.4 per cent earnings per share growth in the year to September 2008 (with a $1.44 dividend) and 8.6 per cent in the year to September 2009 (with a $1.58 dividend).

These forecasts suggest Westpac will be delivering earnings per share growth at or above the sector average (that is, second best in 2008 and middle of the pack growth in 2009). This assumes that National Australia Bank's profit next week is in line with forecasts.

Given the strong share price run Westpac has experienced of late, most brokers recommendation for Westpac is a "hold" with the average price target suggesting additional share price upside of just over fifty cents.

Perhaps reflecting this was Westpac CEO David Morgan's last result, commentary from the analyst community was glowing with few finding fault with operational components of the result. Complaints were largely limited to the usual array of disputes over accounting treatments, restatements to previous periods and composition quality (a typical complaint of more bearish analysts).