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ATCO Ltd. Just Missed Revenue By 6.0%: Here's What Analysts Think Will Happen Next

Simply Wall St

As you might know, ATCO Ltd. (TSE:ACO.X) last week released its latest annual, and things did not turn out so great for shareholders. Results look to have been somewhat negative - revenue fell 6.0% short of analyst estimates at CA$4.7b, and statutory earnings of CA$4.48 per share missed forecasts by 3.2%. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on ATCO after the latest results.

See our latest analysis for ATCO

TSX:ACO.X Past and Future Earnings, February 29th 2020

Following the recent earnings report, the consensus fromfive analysts covering ATCO expects revenues of CA$4.29b in 2020, implying an uncomfortable 8.9% decline in sales compared to the last 12 months. Statutory earnings per share are expected to plummet 40% to CA$2.99 in the same period. Before this earnings report, analysts had been forecasting revenues of CA$4.45b and earnings per share (EPS) of CA$3.01 in 2020. So it looks like analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is expected to maintain EPS.

The consensus has reconfirmed its price target of CA$52.94, showing that analysts don't expect weaker sales expectations next year to have a material impact on ATCO's market value. 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. The most optimistic ATCO analyst has a price target of CA$58.00 per share, while the most pessimistic values it at CA$46.50. 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.

Further, we can compare these estimates to past performance, and see how ATCO forecasts compare to the wider market's forecast performance. These estimates imply that sales are expected to slow, with a forecast revenue decline of 8.9% a significant reduction from annual growth of 3.4% 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 3.6% annually for the foreseeable future. It's pretty clear that ATCO's revenues are expected to perform substantially worse than the wider market.

The Bottom Line

The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. Still, earnings are more important to the long-term value of the business. The consensus price target held steady at CA$52.94, with the latest estimates not enough to have an impact on analysts' estimated valuations.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for ATCO going out to 2023, and you can see them free on our platform here..

You can also view our analysis of ATCO's balance sheet, and whether we think ATCO 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.