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Results: Aramark Exceeded Expectations And The Consensus Has Updated Its Estimates

Simply Wall St

Aramark (NYSE:ARMK) shares fell 6.2% to US$41.39 in the week since its latest quarterly results. It looks like a credible result overall - although revenues of US$4.3b were in line with what analysts predicted, Aramark surprised by delivering a statutory profit of US$0.57 per share, a notable 15% above expectations. 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. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.

Check out our latest analysis for Aramark

NYSE:ARMK Past and Future Earnings, February 7th 2020

Taking into account the latest results, the most recent consensus for Aramark from twelve analysts is for revenues of US$16.8b in 2020, which is a modest 3.4% increase on its sales over the past 12 months. Statutory earnings per share are expected to shoot up 41% to US$1.96. Yet prior to the latest earnings, analysts had been forecasting revenues of US$16.8b and earnings per share (EPS) of US$1.95 in 2020. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

There were no changes to revenue or earnings estimates or the price target of US$48.31, suggesting that the company has met expectations in its recent result. 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 Aramark analyst has a price target of US$57.00 per share, while the most pessimistic values it at US$37.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. Analysts are definitely expecting Aramark's growth to accelerate, with the forecast 3.4% growth ranking favourably alongside historical growth of 2.6% 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 7.6% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, analysts also expect Aramark to grow slower 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. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Aramark's revenues are expected to 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.

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 Aramark going out to 2024, and you can see them free on our platform here..

It might also be worth considering whether Aramark'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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.