Last week, you might have seen that Severn Trent Plc (LON:SVT) released its interim result to the market. The early response was not positive, with shares down 3.0% to UK£23.88 in the past week. Results look mixed - while revenue fell marginally short of analyst estimates at UK£888m, statutory earnings were in line with expectations, at UK£0.66 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. 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 eleven analysts covering Severn Trent, is for revenues of UK£1.78b in 2021, which would reflect a small 2.4% reduction in Severn Trent's sales over the past 12 months. Statutory earnings per share are predicted to surge 102% to UK£0.97. Yet prior to the latest earnings, the analysts had been anticipated revenues of UK£1.78b and earnings per share (EPS) of UK£0.97 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The analysts reconfirmed their price target of UK£24.23, showing that the business is executing well and in line with expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Severn Trent analyst has a price target of UK£27.50 per share, while the most pessimistic values it at UK£21.77. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Severn Trent is an easy business to forecast or the the analysts are all using similar assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Severn Trent's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 2.4%, a significant reduction from annual growth of 1.5% 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 6.2% annually for the foreseeable future. It's pretty clear that Severn Trent's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Severn Trent's revenues are expected to perform worse than the wider industry. The consensus price target held steady at UK£24.23, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Severn Trent going out to 2025, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Severn Trent (at least 1 which is potentially serious) , and understanding them should be part of your investment process.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.com.