Key Takeaways

• Companies are expected to prospectively disclose EPS targets in LTI plans. This presents a challenge for boards, as analyst consensus forecasts are readily available to investors and proxy advisers for comparison against targets when assessing proposed CEO LTI grants.
• Shareholders may not support LTI grants that indicate awards are going to vest at maximum even if management materially misses consensus.
• While forecast EPS growth rates for ASX 100 companies have moderated in the last year, FY27 LTI targets are mostly unchanged.

The EPS growth outlook has moderated since last year

EPS growth expectations for ASX 100 companies have reduced over the last year driven by persistent domestic cost pressures, monetary policy constraints, and weak productivity growth.

Based on analyst consensus estimates as of 1 October 2026, forecast 3-year EPS CAGR is now 14.2% on average across the ASX 100. That compares to 16.7% as of 1 October 2025.

Table 1: Change in ASX 100 EPS growth outlook

Forecast EPS growth rates have reduced in all sectors except for the Technology and Energy sectors.

Table 2: Change in EPS growth outlook per sector

No change in LTI targets (mostly)

Performance measures based on EPS growth remain common in LTI plans on the ASX.

Despite a softening growth outlook, a comparison of EPS targets disclosed for FY26 and FY27 LTI grants indicates that targets have generally remained unchanged.

Of 18 companies in the ASX 100 with disclosed EPS targets in their FY27 LTI plans, 12 companies (67%) had not changed EPS targets compared to their FY26 grants.

The companies that did make a change to EPS requirements in their FY27 LTI plans either made changes to threshold, stretch, or to both threshold and stretch.

How do EPS targets compare to consensus estimates?

The expectation to prospectively disclose EPS targets for CEO LTI grants presents a challenge for boards. Analyst consensus estimates are readily available to investors and proxy advisers for comparison against targets when assessing CEO LTI grants.

While shareholders do not expect boards to align LTI targets with analyst consensus for each grant, which could lead to targets varying significantly from year to year, consideration of market expectations remains important. This is especially the case if the company has a recent history of high LTI vesting outcomes, as investors will question how challenging the targets really are.

The figure below illustrates the distribution of disclosed EPS CAGR targets in FY26 and FY27 LTI plans compared to analyst consensus estimates at grant.

Figure 1: Distribution of LTI targets vs consensus EPS estimates

• For FY26 LTI grants, 6% of companies had EPS CAGR requirements for threshold vesting that exceeded consensus estimates at grant, i.e., no vesting would occur unless the achieved EPS growth was higher than consensus.
• For FY27, this increased to 17% of companies as LTI targets have generally remained unchanged from last year while forecast EPS growth has reduced.
• 50% of FY26 grants and 39% of FY27 grants have EPS vesting scales where consensus sits within the range from threshold to stretch.
• 44% of grants in both years had stretch requirements that were below consensus.

The figure below shows the FY27 LTI target ranges compared to analyst consensus for each of the 18 companies in the sample. It shows the extent to which EPS CAGR hurdles are positioned above, in line with, or below market expectations.

Figure 2: FY27 LTI EPS CAGR targets vs consensus estimates

Shareholders may not support LTI grants that suggest awards will fully vest even if management materially misses consensus.

While 8 of 18 companies have stretch EPS CAGR targets that are positioned below consensus in FY27 LTI plans, the difference between stretch and consensus is 2 percentage points on average for these plans. It may not be material enough to be a concern for investors.

What are the takeaways?

The expectation to prospectively disclose EPS targets for CEO equity grants presents a challenge for boards, as analyst consensus estimates are readily available to investors and proxy advisers for comparison against targets when assessing proposed LTI grants.

Yet while consensus estimates are one factor to consider when calibrating LTI targets, boards may prefer to maintain consistent EPS target ranges in LTI plans over time and only adjust if internal forecasts change materially. Most have not changed EPS CAGR requirements since grants made last year.

The softened EPS outlook has resulted in more LTI plans with targets that appear challenging compared to FY26 grants, with some companies setting targets such that LTI will not pay out even if executives meet market expectations. This may weigh on executive morale and motivation, potentially leading to turnover.

On the flip side, if the outlook improves for the next LTI grant cycle, set and forget prospective targets may no longer appear appropriately challenging.

So while through the cycle EPS targets may be simpler to set and explain, in any year there will either be pressure from investors or executives, depending on the market outlook.

 

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