The annual results for Aramark (NYSE:ARMK) were released last week, making it a good time to revisit its performance. It was not a great result overall. While revenues of US$16b were in line with analyst predictions, earnings were less than expected, missing estimates by 11% to hit US$1.78 per share. 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. With this in mind, we've gathered the latest forecasts to see what analysts are expecting for next year.
Taking into account the latest results, the current consensus from Aramark's twelve analysts is for revenues of US$16.8b in 2020, which would reflect a reasonable 3.5% increase on its sales over the past 12 months. Earnings per share are expected to accumulate 7.0% to US$1.94. In the lead-up to this report, analysts had been modelling revenues of US$16.6b and earnings per share (EPS) of US$2.12 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share forecasts for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$47.62, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. Currently, the most bullish analyst values Aramark at US$55.00 per share, while the most bearish prices it at US$37.00. 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 Aramark shareholders.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Analysts are definitely expecting Aramark's growth to accelerate, with the forecast 3.5% growth ranking favourably alongside historical growth of 2.3% per annum over the past five years. Compare this with other companies in the same market, which are forecast to see a revenue decline of 7.2% next year. So it's clear that despite the acceleration in growth, Aramark is expected to grow meaningfully slower than the market average.
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. The consensus price target held steady at US$47.62, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Aramark analysts - going out to 2024, and you can see them free on our platform here.
You can also see whether Aramark is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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