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National Express Group PLC Just Reported Annual Earnings: Have Analysts Changed Their Mind On The Stock?

Simply Wall St

Last week, you might have seen that National Express Group PLC (LON:NEX) released its annual result to the market. The early response was not positive, with shares down 3.6% to UK£4.24 in the past week. It was a credible result overall, with revenues of UK£2.7b and statutory earnings per share of UK£0.28 both in line with analyst estimates, showing that National Express Group is executing in line with expectations. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for National Express Group

LSE:NEX Past and Future Earnings, March 1st 2020

Taking into account the latest results, the most recent consensus for National Express Group from five analysts is for revenues of UK£2.85b in 2020, which is an okay 3.9% increase on its sales over the past 12 months. Statutory earnings per share are expected to increase 6.4% to UK£0.29. In the lead-up to this report, analysts had been modelling revenues of UK£2.93b and earnings per share (EPS) of UK£0.30 in 2020. So it looks like analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is expected to maintain EPS.

The average price target was steady at UK£4.80 even though revenue estimates declined; likely suggesting analysts place a higher value on earnings. 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. Currently, the most bullish analyst values National Express Group at UK£5.20 per share, while the most bearish prices it at UK£4.35. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that National Express Group's revenue growth is expected to slow, with forecast 3.9% increase next year well below the historical 8.6%p.a. growth over the last five years. Compare this with other companies in the same market, which are forecast to see a revenue decline of 5.0% next year. So it's clear that despite the slowdown in growth, National Express Group is still expected to grow meaningfully faster than the wider market.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Unfortunately they also downgraded their revenue estimates, although our aggregation of analyst estimates suggests that National Express Group is still expected to grow faster than the wider market. Yet - earnings are more important to the intrinsic value of the business. 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.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for National Express Group going out to 2022, and you can see them free on our platform here.

It might also be worth considering whether National Express Group's debt load is appropriate, using our debt analysis tools on the Simply Wall St 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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