It's been a good week for Marston's PLC (LON:MARS) shareholders, because the company has just released its latest annual results, and the shares gained 3.8% to UK£1.28. Revenues came in at UK£1.2b, in line with estimates, while Marston's reported a loss of UK£0.028 per share, well short of prior analyst forecasts for a profit. Following the result, 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. With this in mind, we've gathered the latest forecasts to see what analysts are expecting for next year.
Following the latest results, Marston's's twelve analysts are now forecasting revenues of UK£1.20b in 2020. This would be a modest 2.4% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Marston's forecast to report a profit of UK£0.14 per share. Before this earnings report, analysts had been forecasting revenues of UK£1.20b and earnings per share (EPS) of UK£0.15 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a minor downgrade to their earnings per share forecasts.
The consensus price target held steady at UK£1.12, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Marston's, with the most bullish analyst valuing it at UK£1.40 and the most bearish at UK£0.80 per share. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Marston's's past performance and to peers in the same market. It's pretty clear that analysts expect Marston's's revenue growth will slow down substantially, with revenues next year expected to grow 2.4%, compared to a historical growth rate of 8.1% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 4.9% 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 Marston's.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will 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.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Marston's going out to 2023, and you can see them free on our platform here..
You can also view our analysis of Marston's's balance sheet, and whether we think Marston's is carrying too much debt, for free on our platform here.
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