Yahoo Finance Compass Group PLC Earnings Missed Analyst Estimates: Here's What Analysts Are Forecasting Now
Investors in Compass Group PLC (LON:CPG) had a good week, as its shares rose 2.3% to close at UK£18.69 following the release of its annual results. Revenues were in line with forecasts, at UK£25b, although statutory earnings per share came in 15% below what analysts expected, at UK£0.70 per share. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
See our latest analysis for Compass Group
Taking into account the latest results, the current consensus from Compass Group's 18 analysts is for revenues of UK£26.2b in 2020, which would reflect an okay 5.2% increase on its sales over the past 12 months. Statutory earnings per share are expected to shoot up 20% to UK£0.84. Yet prior to the latest earnings, analysts had been forecasting revenues of UK£26.1b and earnings per share (EPS) of UK£0.84 in 2020. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at UK£19.60. 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. The most optimistic Compass Group analyst has a price target of UK£25.68 per share, while the most pessimistic values it at UK£16.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Compass Group's past performance and to peers in the same market. It's pretty clear that analysts expect Compass Group's revenue growth will slow down substantially, with revenues next year expected to grow 5.2%, compared to a historical growth rate of 8.2% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.8% next year. Factoring in the forecast slowdown in growth, it looks like analysts are expecting Compass Group to grow at about the same rate as the wider market.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Compass Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Compass Group analysts - going out to 2024, and you can see them free on our platform here.
You can also view our analysis of Compass Group's balance sheet, and whether we think Compass Group is carrying too much debt, for free on our platform here.
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