Shareholders might have noticed that MSCI Inc. (NYSE:MSCI) filed its first-quarter result this time last week. The early response was not positive, with shares down 3.5% to US$320 in the past week. MSCI reported US$417m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$1.73 beat expectations, being 9.0% higher than what the analysts expected. The 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the consensus forecast from MSCI's nine analysts is for revenues of US$1.66b in 2020, which would reflect a modest 3.8% improvement in sales compared to the last 12 months. Per-share earnings are expected to accumulate 3.8% to US$6.53. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.66b and earnings per share (EPS) of US$6.38 in 2020. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target was unchanged at US$310, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. The most optimistic MSCI analyst has a price target of US$365 per share, while the most pessimistic values it at US$227. This shows there is still 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.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that MSCI's revenue growth is expected to slow, with forecast 3.8% increase next year well below the historical 9.4%p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 3.6% next year. Factoring in the forecast slowdown in growth, it looks like MSCI is forecast to grow at about the same rate as the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards MSCI following these results. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. The consensus price target held steady at US$310, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on MSCI. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for MSCI going out to 2024, and you can see them free on our platform here..
Plus, you should also learn about the 2 warning signs we've spotted with MSCI .
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