It's been a good week for Marks and Spencer Group plc (LON:MKS) shareholders, because the company has just released its latest half-year results, and the shares gained 7.9% to UK£0.96. Results overall were respectable, with statutory earnings of UK£0.012 per share roughly in line with what the analysts had forecast. Revenues of UK£4.1b came in 3.7% ahead of analyst predictions. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Marks and Spencer Group after the latest results.
Taking into account the latest results, the 20 analysts covering Marks and Spencer Group provided consensus estimates of UK£9.05b revenue in 2021, which would reflect a noticeable 3.8% decline on its sales over the past 12 months. Earnings are expected to improve, with Marks and Spencer Group forecast to report a statutory profit of UK£0.054 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of UK£9.11b and earnings per share (EPS) of UK£0.048 in 2021. Although the revenue estimates have not really changed, we can see there's been a substantial gain in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
There's been no major changes to the consensus price target of UK£1.30, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock'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. Currently, the most bullish analyst values Marks and Spencer Group at UK£1.70 per share, while the most bearish prices it at UK£1.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Of course, another way to look at these forecasts is to place them into context against the industry itself. Over the past five years, revenues have declined around 1.3% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 3.8% decline in revenue next year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 7.0% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Marks and Spencer Group to suffer worse than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Marks and Spencer Group's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Marks and Spencer Group's revenues are expected to perform worse than the wider industry. The consensus price target held steady at UK£1.30, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Marks and Spencer Group. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Marks and Spencer Group going out to 2025, and you can see them free on our platform here..
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Marks and Spencer Group , and understanding this should be part of your investment process.
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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