Yahoo Finance McMillan Shakespeare Limited Just Missed Earnings And Its EPS Looked Sad - But Analysts Have Updated Their Models
McMillan Shakespeare Limited (ASX:MMS) shares fell 2.5% to AU$11.95 in the week since its latest half-yearly results. Revenues were in line with forecasts, at AU$270m, although statutory earnings per share came in 12% below what analysts expected, at AU$0.76 per share. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
See our latest analysis for McMillan Shakespeare
Following last week's earnings report, McMillan Shakespeare's six analysts are forecasting 2020 revenues to be AU$543.5m, approximately in line with the last 12 months. Statutory earnings per share are expected to bounce 31% to AU$1.02. Before this earnings report, analysts had been forecasting revenues of AU$547.6m and earnings per share (EPS) of AU$1.05 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.
The consensus price target held steady at AU$13.14, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values McMillan Shakespeare at AU$14.80 per share, while the most bearish prices it at AU$11.80. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. We would highlight that sales are expected to reverse, with the forecast 0.6% revenue decline a notable change from historical growth of 7.0% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 9.1% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect McMillan Shakespeare to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than 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.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for McMillan Shakespeare going out to 2024, and you can see them free on our platform here.
You can also view our analysis of McMillan Shakespeare's balance sheet, and whether we think McMillan Shakespeare is carrying too much debt, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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