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Last week saw the newest yearly earnings release from Royal Bank of Canada (TSE:RY), an important milestone in the company's journey to build a stronger business. Results overall were respectable, with statutory earnings of CA$11.06 per share roughly in line with what the analysts had forecast. Revenues of CA$50b came in 5.6% ahead of analyst predictions. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. 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 current consensus, from the ten analysts covering Royal Bank of Canada, is for revenues of CA$49.3b in 2022, which would reflect a noticeable 2.2% reduction in Royal Bank of Canada's sales over the past 12 months. Statutory per-share earnings are expected to be CA$11.08, roughly flat on the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of CA$50.8b and earnings per share (EPS) of CA$11.10 in 2022. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.
The average price target was steady at CA$144even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. 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. Currently, the most bullish analyst values Royal Bank of Canada at CA$150 per share, while the most bearish prices it at CA$140. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Royal Bank of Canada is an easy business to forecast or the the analysts are all using similar assumptions.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 2.2% by the end of 2022. This indicates a significant reduction from annual growth of 4.8% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.0% annually for the foreseeable future. It's pretty clear that Royal Bank of Canada's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Yet - earnings are more important to the intrinsic value of the business. The consensus price target held steady at CA$144, 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 Royal Bank of Canada. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Royal Bank of Canada analysts - going out to 2023, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.