U.S. markets open in 2 hours 15 minutes

The Madison Square Garden Company Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

Simply Wall St

As you might know, The Madison Square Garden Company (NYSE:MSG) recently reported its second-quarter numbers. Revenues were US$629m, approximately in line with what analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$3.93, an impressive 60% ahead of estimates. Analysts 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Madison Square Garden after the latest results.

See our latest analysis for Madison Square Garden

NYSE:MSG Past and Future Earnings, February 10th 2020

After the latest results, the eight analysts covering Madison Square Garden are now predicting revenues of US$1.67b in 2020. If met, this would reflect a credible 2.9% improvement in sales compared to the last 12 months. Statutory losses are expected to reduce, shrinking 19% from last year to US$1.19. Yet prior to the latest earnings, analysts had been forecasting revenues of US$1.69b and losses of US$2.11 per share in 2020. Although the revenue estimates have not really changed, we can see there's been a considerable lift to earnings per share expectations, suggesting that analysts have become more bullish after the latest result.

The average analyst price target held steady at US$353, seeming to indicate that business is performing 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 Madison Square Garden, with the most bullish analyst valuing it at US$411 and the most bearish at US$312 per share. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.

It can also be useful to step back and take a broader view of how analyst forecasts compare to Madison Square Garden's performance in recent years. We would highlight that Madison Square Garden's revenue growth is expected to slow, with forecast 2.9% increase next year well below the historical 11%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 10.0% per year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Madison Square Garden.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for next year. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Madison Square Garden's revenues are expected to perform worse than the wider market. 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 Madison Square Garden. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Madison Square Garden analysts - going out to 2024, and you can see them free on our platform here.

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.