Investors in A.G. BARR p.l.c. (LON:BAG) had a good week, as its shares rose 6.8% to close at UK£5.00 following the release of its full-year results. A.G. BARR reported UK£256m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of UK£0.26 beat expectations, being 2.3% higher than what the analysts expected. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on A.G. BARR after the latest results.
Following last week's earnings report, A.G. BARR's seven analysts are forecasting 2021 revenues to be UK£255.8m, approximately in line with the last 12 months. Statutory per share are forecast to be UK£0.26, approximately in line with the last 12 months. Before this earnings report, the analysts had been forecasting revenues of UK£263.6m and earnings per share (EPS) of UK£0.28 in 2021. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a minor downgrade to earnings per share estimates.
Despite the cuts to forecast earnings, there was no real change to the UK£4.91 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. There are some variant perceptions on A.G. BARR, with the most bullish analyst valuing it at UK£5.80 and the most bearish at UK£3.80 per share. 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.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that A.G. BARR's revenue growth will slow down substantially, with revenues next year expected to grow 0.04%, compared to a historical growth rate of 1.0% 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 5.0% per year. Factoring in the forecast slowdown in growth, it seems obvious that A.G. BARR is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at UK£4.91, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for A.G. BARR going out to 2023, 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 1 warning sign for A.G. BARR that you need to be mindful of.
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