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Metro Inc. Just Missed Earnings And Its EPS Looked Sad - But Analysts Have Updated Their Models

Simply Wall St

Metro Inc. (TSE:MRU) came out with its full-year results last week, and we wanted to see how the business is performing and what top analysts think of the company following this report. Revenues of CA$17b were in line with forecasts, although earnings per share (EPS) came in below expectations at CA$2.78, missing estimates by 8.3%. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see analysts' latest post-earnings forecasts for next year.

See our latest analysis for Metro

TSX:MRU Past and Future Earnings, November 24th 2019

Taking into account the latest results, the most recent consensus for Metro from seven analysts is for revenues of CA$17.2b in 2020, which is a reasonable 2.8% increase on its sales over the past 12 months. Earnings per share are expected to climb 11% to CA$3.11. Yet prior to the latest earnings, analysts had been forecasting revenues of CA$17.1b and earnings per share (EPS) of CA$3.35 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share forecasts for next year.

It might be a surprise to learn that the consensus price target was broadly unchanged at CA$56.27, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. The most optimistic Metro analyst has a price target of CA$63.00 per share, while the most pessimistic values it at CA$42.00. 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 to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. It's pretty clear that analysts expect Metro's revenue growth will slow down substantially, with revenues next year expected to grow 2.8%, compared to a historical growth rate of 6.9% over the past five years. Compare this to the other companies in this market with analyst coverage, which are forecast to grow their revenue at 2.5% per year. So it's pretty clear that, while Metro's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.

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. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. The consensus price target held steady at CA$56.27, with the latest estimates not enough to have an impact on analysts' estimated valuations.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Metro going out to 2021, and you can see them free on our platform here..

You can also view our analysis of Metro's balance sheet, and whether we think Metro is carrying too much debt, for free 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.

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