Earnings upgrades in-store for Macquarie Group

Having been oversold during the recent share market selloff, diversified financial company Macquarie Group (ASX: MQG) offers a more attractive entry point for those who like the stock's underlying growth-by-acquisition and co-investment strategy story.

While the stock's share price is down around 10% since the beginning of the year to $74.30 – putting it on a relatively inexpensive (2016) price to earnings (P/E) ratio of 12.40 times – analysts expect the company's recent acquisition spree, executed at appealing asset prices, to see the company issue further earnings upgrades later this year.

Much of the stock's additional long-term profit growth potential is expected to come from its recent acquisitions, which include an aircraft leasing opportunity, plus the Esanda Dealer Finance unit.

Analysts also like the defensive nature of Macquarie's portfolio of assets, while additional tailwinds are expected from its significant international exposure, courtesy of further likely weakness in the Aussie dollar (A$).

Over the short-term, Macquarie is forecast to increase its return on equity (ROE) by 15% from 12.03% in 2015 to 13.89% in 2016; while earning per share (EPS) is expected to grow by 28% from $4.65 in 2015 to $5.99 in 2016.

Equally attractive to would-be investors is the stock's forecast 17% increase in dividend per share, up from $3.30 in 2015 to $3.88 in 2016 – which gives it a forecast 2016 dividend yield of 5.22%.

While consensus estimates have Macquarie reporting a record $2.1 billion profit for the year ended March 31, 10 of the 13 analysts covering the stock rate it a "buy".

Interestingly, following on the heels of its big ballsy $8.23 billion acquisition of Esanda dealer finance portfolio from ANZ Banking Group, it recently expressed interest in a locally listed tiddler, a property software and online services company, Onthehouse Holdings (ASX: OTH) with a pre-bid market capitalisation of less than $50 million.

It's understood that Macquarie will account for 60% of the bidding group, with entity 77 Victoria Street Trust, and CoreLogic comprising the remainder. While Macquarie has not disclosed it interest in Onthehouse Holdings, it was an early backer of national online property transfer company Property Exchange Australia which is expected to list within the next 18 months.

Trading at 71¢ a share, well under its 2011 listing price of $1 for all of 2015, Onthehouse is under pressure to revive its underperforming online services arm, and this could attractive other potential suitors, like  realestate.com.au or Fairfax Media's Domain.

Meantime, back at the top-end of town, there's talk that Macquarie is the frontrunner to buy a stake of more than 40% in Singaporean oil-storage provider Universal Terminals, in a transaction that may value the company at US$3 billion ($4.3 billion) including debt.

Macquarie's alleged interests in Universal Terminals, follows its involvement last December in the acquisition of three UK-based terminals from Royal Vopak, a tank storage provider for the oil and chemical industry.

With a truly investment-grade balance sheet, Macquarie remains one of the ASX's standout "Cash and Growth" stories, and provides a significant amount of exposure to the sorts of global sectors that remain beyond the reach of all but a handful of ASX-listed stocks.

Pay close attention to Macquarie's operational briefing on 4 February.