As you might know, National Grid plc (LON:NG.) last week released its latest annual, and things did not turn out so great for shareholders. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at UK£15b, statutory earnings missed forecasts by an incredible 37%, coming in at just UK£0.36 per share. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the consensus forecast from National Grid's 13 analysts is for revenues of UK£15.5b in 2021, which would reflect a satisfactory 6.9% improvement in sales compared to the last 12 months. Per-share earnings are expected to soar 44% to UK£0.53. In the lead-up to this report, the analysts had been modelling revenues of UK£15.7b and earnings per share (EPS) of UK£0.57 in 2021. The 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 numbers for next year.
The consensus price target held steady at UK£10.09, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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 National Grid, with the most bullish analyst valuing it at UK£11.50 and the most bearish at UK£8.00 per share. 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.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting National Grid's growth to accelerate, with the forecast 6.9% growth ranking favourably alongside historical growth of 0.9% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 3.0% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect National Grid to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for National Grid going out to 2025, and you can see them free on our platform here..
Before you take the next step you should know about the 2 warning signs for National Grid (1 can't be ignored!) that we have uncovered.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.