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Earnings Miss: ATS Automation Tooling Systems Inc. Missed EPS By 33% And Analysts Are Revising Their Forecasts

Simply Wall St

Last week, you might have seen that ATS Automation Tooling Systems Inc. (TSE:ATA) released its quarterly result to the market. The early response was not positive, with shares down 6.0% to CA$19.11 in the past week. Sales of CA$367m surpassed estimates by 2.6%, although statutory earnings per share missed badly, coming in 33% below expectations at CA$0.04 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. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.

View our latest analysis for ATS Automation Tooling Systems

TSX:ATA Past and Future Earnings, February 8th 2020

After the latest results, the four analysts covering ATS Automation Tooling Systems are now predicting revenues of CA$1.46b in 2021. If met, this would reflect a credible 4.5% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to leap 78% to CA$1.12. In the lead-up to this report, analysts had been modelling revenues of CA$1.45b and earnings per share (EPS) of CA$1.12 in 2021. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

Analysts reconfirmed their price target of CA$24.88, showing that the business is executing well and in line with expectations. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on ATS Automation Tooling Systems, with the most bullish analyst valuing it at CA$28.00 and the most bearish at CA$22.50 per share. 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.

Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. It's pretty clear that analysts expect ATS Automation Tooling Systems's revenue growth will slow down substantially, with revenues next year expected to grow 4.5%, compared to a historical growth rate of 7.1% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 14% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect ATS Automation Tooling Systems to grow slower than the wider market.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. 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 in mind, we wouldn't be too quick to come to a conclusion on ATS Automation Tooling Systems. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for ATS Automation Tooling Systems going out to 2022, and you can see them free on our platform here..

It might also be worth considering whether ATS Automation Tooling Systems's debt load is appropriate, using our debt analysis tools on the Simply Wall St 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.

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