There's been a notable change in appetite for Flight Centre Travel Group Limited (ASX:FLT) shares in the week since its interim report, with the stock down 17% to AU$32.62. The result was positive overall - although revenues of AU$1.5b were in line with what analysts predicted, Flight Centre Travel Group surprised by delivering a statutory profit of AU$2.60 per share, modestly greater than expected. 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' statutory forecasts suggest is in store for next year.
Taking into account the latest results, Flight Centre Travel Group's 13 analysts currently expect revenues in 2020 to be AU$3.08b, approximately in line with the last 12 months. Statutory earnings per share are expected to dive 29% to AU$1.41 in the same period. In the lead-up to this report, analysts had been modelling revenues of AU$3.21b and earnings per share (EPS) of AU$2.10 in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a large cut to earnings per share estimates.
Analysts made no major changes to their price target of AU$40.52, suggesting the downgrades are not expected to have a long-term impact on Flight Centre Travel Group's valuation. 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 Flight Centre Travel Group, with the most bullish analyst valuing it at AU$49.75 and the most bearish at AU$35.52 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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 1.6% a significant reduction from annual growth of 6.2% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 7.4% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Flight Centre Travel Group to grow slower than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Flight Centre Travel Group. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at AU$40.52, 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 forecasts for Flight Centre Travel Group going out to 2023, and you can see them free on our platform here.
We also provide an overview of the Flight Centre Travel Group Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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