There's been a notable change in appetite for Empire Company Limited (TSE:EMP.A) shares in the week since its second-quarter report, with the stock down 14% to CA$30.48. Revenues of CA$6.4b were in line with forecasts, although earnings per share (EPS) came in below expectations at CA$0.57, missing estimates by 3.4%. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what analysts are forecasting for next year.
Following last week's earnings report, Empire's eight analysts are forecasting 2020 revenues to be CA$25.9b, approximately in line with the last 12 months. Prior to the latest earnings, analysts were forecasting revenues of CA$26.1b in 2020, and did not provide an EPS estimate. From what we can see of these results, it looks like Empire is performing in line with analyst expectations. The analysts we track have all updated their numbers following the results, and there were no major changes to their forecasts for next year.
Intriguingly, analysts have cut their price target 5.0% to CA$37.78 showing a clear decline in sentiment around Empire's valuation. 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 Empire analyst has a price target of CA$42.00 per share, while the most pessimistic values it at CA$34.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Empire's performance in recent years. It's pretty clear that analysts expect Empire's revenue growth will slow down substantially, with revenues next year expected to grow 0.6%, compared to a historical growth rate of 0.9% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 3.0% per year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Empire.
The Bottom Line
The most important thing to take away from these updates is that analysts are definitely optimistic on the business, given that they've begun forecasting positive per-share earnings for next year. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
At least one of Empire's eight analysts has provided estimates out to 2022, which can be seen for free on our platform here.
You can also view our analysis of Empire's balance sheet, and whether we think Empire is carrying too much debt, for free on our platform here.
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