Investors in Burberry Group plc (LON:BRBY) had a good week, as its shares rose 5.3% to close at UK£21.52 following the release of its half-year results. Revenues were UK£1.3b, approximately in line with expectations, although earnings per share (EPS) performed substantially better. EPS of UK£0.36 were also better than expected, beating analyst predictions by 16%. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, Burberry Group's 20 analysts currently expect revenues in 2020 to be UK£2.82b, approximately in line with the last 12 months. Earnings per share are forecast to reduce 3.6% to UK£0.84 in the same period. Before this earnings report, analysts had been forecasting revenues of UK£2.84b and earnings per share (EPS) of UK£0.86 in 2020. 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 forecasts for next year.
The consensus price target held steady at UK£21.00, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Burberry Group, with the most bullish analyst valuing it at UK£27.00 and the most bearish at UK£17.80 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
In addition, we can look to Burberry Group's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. We would highlight that Burberry Group's revenue growth is expected to slow, with forecast 1.3% increase next year well below the historical 2.7%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 5.1% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Burberry Group to grow slower than the wider market.
The Bottom Line
The biggest highlight of the new consensus is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Burberry Group. 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 UK£21.00, 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. We have estimates - from multiple Burberry Group analysts - going out to 2024, and you can see them free on our platform here.
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If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.