It's been a pretty great week for Spectris plc (LON:SXS) shareholders, with its shares surging 10% to UK£30.05 in the week since its latest annual results. It looks like a credible result overall - although revenues of UK£1.6b were what analysts expected, Spectris surprised by delivering a (statutory) profit of UK£2.02 per share, an impressive 321% above what analysts had forecast. 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. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
After the latest results, the consensus from Spectris's 13 analysts is for revenues of UK£1.50b in 2020, which would reflect an uncomfortable 8.1% decline in sales compared to the last year of performance. Statutory earnings per share are forecast to nosedive 42% to UK£1.18 in the same period. In the lead-up to this report, analysts had been modelling revenues of UK£1.56b and earnings per share (EPS) of UK£1.29 in 2020. It's pretty clear that analyst sentiment has fallen after the latest results, leading to lower revenue forecasts and a minor downgrade to earnings per share estimates.
Despite the cuts to forecast earnings, there was no real change to the UK£27.72 price target, showing that analysts don't think the changes have a meaningful impact on the stock's intrinsic value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Spectris, with the most bullish analyst valuing it at UK£35.00 and the most bearish at UK£20.65 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Spectris's past performance and to peers in the same market. We would highlight that sales are expected to reverse, with the forecast 8.1% revenue decline a notable change from historical growth of 8.1% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 4.8% next year. It's pretty clear that Spectris's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Spectris. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at UK£27.72, with the latest estimates not enough to have an impact on analysts' estimated valuations.
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 Spectris going out to 2022, and you can see them free on our platform here..
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