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Franco-Nevada Corporation (TSE:FNV) defied analyst predictions to release its third-quarter results, which were ahead of market expectations. Franco-Nevada delivered a significant beat to revenue and earnings per share (EPS) expectations, with sales hitting US$280m, some 13% above indicated. Statutory EPS were US$0.81, an impressive 37% ahead of forecasts. Following the result, the 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
After the latest results, the eight analysts covering Franco-Nevada are now predicting revenues of US$1.26b in 2021. If met, this would reflect a huge 29% improvement in sales compared to the last 12 months. Per-share earnings are expected to surge 142% to US$3.35. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.25b and earnings per share (EPS) of US$3.40 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The analysts reconfirmed their price target of US$162, showing that the business is executing well and in line with expectations. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Franco-Nevada, with the most bullish analyst valuing it at US$250 and the most bearish at US$133 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Franco-Nevada's growth to accelerate, with the forecast 29% growth ranking favourably alongside historical growth of 13% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.3% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Franco-Nevada is expected to grow much faster than its industry.
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. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. 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 Franco-Nevada. Long-term earnings power is much more important than next year's profits. We have forecasts for Franco-Nevada going out to 2024, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Franco-Nevada , and understanding it should be part of your investment process.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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