UMG Predicts Profit Boost, Driven By Superfans And Star Artists Like Taylor Swift

Universal Music Group (UMG) announced on Tuesday that it anticipates annual core profit growth of more than 10% through 2028, driven by increased subscription revenue, expanded partnerships, and strong support from superfans of artists like Taylor Swift, BTS, and Drake.

The world’s largest music label shared these financial targets ahead of a capital markets day and projected compound annual revenue growth of 7% during the same period. This forecast surpasses the consensus outlook of 6.1% annual revenue growth and 8.8% annual adjusted EBITDA growth, as noted by ING.

The capital markets day, set to take place at London’s iconic Abbey Road Studios, is expected to provide UMG with a platform to explain its strategies for reviving slowing subscriber and streaming growth. The company’s stock suffered a 30% drop in late July after second-quarter figures missed expectations.

In its outlook, UMG forecast annual subscription revenue growth of between 8% and 10%, outpacing the consensus estimate of 6.6%, according to ING. J.P. Morgan echoed the positive sentiment, stating that the targets align with its projections and are better than market consensus. The firm added, “We believe consensus forecasts are too conservative on subscription growth and other revenue streams, and EBITDA forecasts do not fully reflect operational gearing and announced cost savings over the next three years.”

UMG also expects a free cash flow conversion rate of 60% to 70%. In mid-August, the company expanded its partnership with Meta Platforms, the parent company of Facebook, to create new opportunities for its artists and songwriters across Meta’s social media platforms.

UMG’s second-quarter subscription revenue growth slowed to 6.9%, down from 12.5% in the first quarter, missing the 11.1% estimate provided in a company-compiled consensus cited by Barclays.

For 2023, UMG reported an 11% rise in adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) to €2.4 billion, with a 14.6% gain at constant exchange rates. UMG shares rose 3.4% in morning trading following the announcement.