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Earnings Beat: Parsons Corporation Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

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Shareholders might have noticed that Parsons Corporation (NYSE:PSN) filed its quarterly result this time last week. The early response was not positive, with shares down 3.5% to US$30.41 in the past week. Revenues were US$1.0b, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.40, an impressive 20% ahead of estimates. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for Parsons

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Taking into account the latest results, the current consensus from Parsons' nine analysts is for revenues of US$4.21b in 2021, which would reflect a satisfactory 5.4% increase on its sales over the past 12 months. Statutory earnings per share are predicted to shoot up 68% to US$1.52. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$4.20b and earnings per share (EPS) of US$1.55 in 2021. The 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 numbers for next year.

It might be a surprise to learn that the consensus price target was broadly unchanged at US$41.71, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on 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. There are some variant perceptions on Parsons, with the most bullish analyst valuing it at US$49.00 and the most bearish at US$35.00 per share. 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.

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. It's pretty clear that there is an expectation that Parsons' revenue growth will slow down substantially, with revenues next year expected to grow 5.4%, compared to a historical growth rate of 9.5% over the past three years. Compare this to the 71 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 4.9% per year. Factoring in the forecast slowdown in growth, it looks like Parsons is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Parsons. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as 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.

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 Parsons analysts - going out to 2023, and you can see them free on our platform here.

You can also see our analysis of Parsons' Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.