Investors in Spire Inc. (NYSE:SR) had a good week, as its shares rose 2.2% to close at US$77.75 following the release of its annual results. It looks like the results were a bit of a negative overall. While revenues of US$2.0b were in line with analyst predictions, earnings were less than expected, missing estimates by 6.1% to hit US$3.52 per share. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what analysts are forecasting for next year.
Taking into account the latest results, Spire's five analysts currently expect revenues in 2020 to be US$1.99b, approximately in line with the last 12 months. Earnings per share are expected to accumulate 6.7% to US$3.77. Yet prior to the latest earnings, analysts had been forecasting revenues of US$2.02b and earnings per share (EPS) of US$3.91 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a minor downgrade to their earnings per share forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$80.57, 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. The most optimistic Spire analyst has a price target of US$87.00 per share, while the most pessimistic values it at US$69.00. 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.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Spire's performance in recent years. We would highlight that Spire's revenue growth is expected to slow, with forecast 1.7% increase next year well below the historical 2.8%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 4.0% next year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Spire.
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 Spire. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Spire's revenues are expected to perform worse than the wider market. The consensus price target held steady at US$80.57, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Spire. 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 Spire going out to 2023, and you can see them free on our platform here..
You can also view our analysis of Spire's balance sheet, and whether we think Spire is carrying too much debt, for free on our platform here.
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