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Earnings Report: Redrow plc Missed Revenue Estimates By 9.1%

Simply Wall St

Redrow plc (LON:RDW) shares fell 3.1% to UK£7.70 in the week since its latest half-year results. Results look mixed - while revenue fell marginally short of analyst estimates at UK£870m, statutory earnings were in line with expectations, at UK£0.92 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Redrow

LSE:RDW Past and Future Earnings, February 8th 2020

After the latest results, the 14 analysts covering Redrow are now predicting revenues of UK£2.16b in 2020. If met, this would reflect a credible 7.4% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to accumulate 8.3% to UK£0.93. Yet prior to the latest earnings, analysts had been forecasting revenues of UK£2.16b and earnings per share (EPS) of UK£0.91 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target rose 6.8% to UK£8.63, suggesting that higher earnings estimates flow through to the stock's valuation as well. 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. Currently, the most bullish analyst values Redrow at UK£10.70 per share, while the most bearish prices it at UK£6.30. 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.

Further, we can compare these estimates to past performance, and see how Redrow forecasts compare to the wider market's forecast performance. It's pretty clear that analysts expect Redrow's revenue growth will slow down substantially, with revenues next year expected to grow 7.4%, compared to a historical growth rate of 14% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 5.0% next year. So it's pretty clear that, while Redrow's revenue growth is expected to slow, it's still expected to grow faster than the market itself.

The Bottom Line

The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Redrow following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Redrow's revenues are expected to grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.

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

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months 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.