Market forces rained on the parade of Whitbread PLC (LON:WTB) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. The stock price has risen 4.9% to UK£21.53 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
Following the downgrade, the consensus from 20 analysts covering Whitbread is for revenues of UK£941m in 2021, implying a concerning 55% decline in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of UK£1.0b in 2021. The forecasts seem less optimistic overall, with the modest decline in revenue estimates in the latest consensus update.
We'd point out that there was no major changes to their price target of UK£24.99, suggesting the latest estimates were not enough to shift their view on the value of the business. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Whitbread at UK£36.00 per share, while the most bearish prices it at UK£15.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One more thing stood out to us about these estimates, and it's the idea that Whitbread'sdecline is expected to accelerate, with revenues forecast to fall 55% next year, topping off a historical decline of 8.3% a year over the past five years. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 7.9% next year. So while a broad number of companies are forecast to grow, unfortunately Whitbread is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. They also expect company revenue to perform worse than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Whitbread after today.
So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Whitbread, including major dilution from new stock issuance in the past year. For more information, you can click here to discover this and the 1 other flag we've identified.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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