Fortis Inc. (TSE:FTS) just released its latest quarterly report and things are not looking great. Fortis missed analyst forecasts, with revenues of CA$2.4b and statutory earnings per share (EPS) of CA$0.67, falling short by 4.2% and 6.1% respectively. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the latest results, Fortis' 14 analysts are now forecasting revenues of CA$9.21b in 2020. This would be a credible 5.4% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to dive 29% to CA$2.63 in the same period. Before this earnings report, the analysts had been forecasting revenues of CA$9.00b and earnings per share (EPS) of CA$2.65 in 2020. There doesn't appear to have been a major change in sentiment following the results, other than the modest lift to revenue estimates.
Even though revenue forecasts increased, there was no change to the consensus price target of CA$57.81, suggesting the analysts are focused on earnings as the driver of value creation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Fortis analyst has a price target of CA$63.00 per share, while the most pessimistic values it at CA$48.00. Even so, with a relatively close grouping of analyst estimates, it looks to us as though the analysts are quite confident in their valuations, suggesting that Fortis is an easy business to forecast or that the the analysts are all using similar assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Fortis' past performance and to peers in the same industry. It's pretty clear that there is an expectation that Fortis' revenue growth will slow down substantially, with revenues next year expected to grow 5.4%, compared to a historical growth rate of 7.8% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 3.1% next year. So it's pretty clear that, while Fortis' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target held steady at CA$57.81, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Fortis going out to 2022, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 4 warning signs for Fortis (1 is concerning!) that you need to be mindful of.
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