RELX PLC (LON:REL) shareholders are probably feeling a little disappointed, since its shares fell 7.7% to UK£16.71 in the week after its latest half-year results. It was a credible result overall, with revenues of UK£3.5b and statutory earnings per share of UK£0.77 both in line with analyst estimates, showing that RELX is executing in line with expectations. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following last week's earnings report, RELX's 18 analysts are forecasting 2020 revenues to be UK£7.62b, approximately in line with the last 12 months. Statutory earnings per share are predicted to rise 7.6% to UK£0.71. Yet prior to the latest earnings, the analysts had been anticipated revenues of UK£7.77b and earnings per share (EPS) of UK£0.73 in 2020. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
The consensus price target held steady at UK£19.56, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic RELX analyst has a price target of UK£23.20 per share, while the most pessimistic values it at UK£16.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the RELX's past performance and to peers in the same industry. It's pretty clear that there is an expectation that RELX's revenue growth will slow down substantially, with revenues next year expected to grow 1.8%, compared to a historical growth rate of 5.6% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.5% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than RELX.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for RELX. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that RELX'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.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for RELX going out to 2024, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 1 warning sign for RELX you should be aware of.
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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