Investors in Global Water Resources, Inc. (NASDAQ:GWRS) had a good week, as its shares rose 6.2% to close at US$11.32 following the release of its first-quarter results. Although revenues of US$8.2m were in line with analyst expectations, Global Water Resources surprised on the earnings front, with an unexpected (statutory) profit of US$0.02 per share a nice improvement on the losses that the analystforecast. The analyst typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether the analyst has changed their earnings models, following these results.
Taking into account the latest results, Global Water Resources' single analyst currently expect revenues in 2020 to be US$36.3m, approximately in line with the last 12 months. Statutory earnings per share are predicted to swell 13% to US$0.10. In the lead-up to this report, the analyst had been modelling revenues of US$36.4m and earnings per share (EPS) of US$0.06 in 2020. There was no real change to the revenue estimates, but the analyst does seem more bullish on earnings, given the considerable lift to earnings per share expectations following these results.
The average the analyst price target fell 12% to US$12.50, suggesting thatthe analyst has other concerns, and the improved earnings per share outlook was not enough to allay them.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Global Water Resources' revenue growth is expected to slow, with forecast 0.9% increase next year well below the historical 2.8%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 7.3% next year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Global Water Resources.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Global Water Resources' earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. Furthermore, the analyst also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
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 least one analyst has provided forecasts out to 2022, which can be seen for free on our platform here.
Even so, be aware that Global Water Resources is showing 5 warning signs in our investment analysis , and 1 of those can't be ignored...
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