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Greencore Group plc (LON:GNC) Just Released Its Half-Year Earnings: Here's What Analysts Think

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It's been a mediocre week for Greencore Group plc (LON:GNC) shareholders, with the stock dropping 13% to UK£1.45 in the week since its latest half-year results. The result was fairly weak overall, with revenues of UK£577m being 4.6% less than what the analysts had been modelling. Following the result, the 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Greencore Group

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earnings-and-revenue-growth

Taking into account the latest results, Greencore Group's eight analysts currently expect revenues in 2021 to be UK£1.28b, approximately in line with the last 12 months. Greencore Group is also expected to turn profitable, with statutory earnings of UK£0.035 per share. In the lead-up to this report, the analysts had been modelling revenues of UK£1.29b and earnings per share (EPS) of UK£0.04 in 2021. So there's definitely been a decline in sentiment after the latest results, noting the real cut to new EPS forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at UK£1.68, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Greencore Group analyst has a price target of UK£2.00 per share, while the most pessimistic values it at UK£1.20. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Greencore Group shareholders.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. From these estimates it looks as though the analysts expect the years of declining sales to come to an end, given the flat revenue forecast out to 2021. That would be a definite improvement, given that the past year have seen sales shrink 13% annually. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 6.6% annually. So it's pretty clear that, although revenues are improving, Greencore Group is still expected to grow slower than the industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Greencore Group's revenues are expected to perform worse than the wider industry. 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Greencore Group going out to 2025, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 2 warning signs for Greencore Group you should be aware of, and 1 of them is concerning.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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