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SSE plc (LON:SSE): Earnings To Drop Next Year, Is It A Long-Term Trend?

Looking at SSE plc’s (LSE:SSE) earnings update in September 2017, analyst consensus outlook appear pessimistic, with profits predicted to drop by -17.27% next year compared with the past 5-year average growth rate of 4.40%. With net income at current levels of £1,599.5M, the consensus growth rate suggests that earnings will decline to £1,323.3M by 2018. Below is a brief commentary on the longer term outlook the market has for SSE. Readers that are interested in understanding SSE beyond these figures should research its fundamentals here. View our latest analysis for SSE

What can we expect from SSE in the longer term?

Longer term expectations from the 16 analysts covering SSE’s stock is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

LSE:SSE Future Profit Dec 12th 17
LSE:SSE Future Profit Dec 12th 17

From the current net income level of £1,599.5M and the final forecast of £1,423.7M by 2020, the annual rate of growth for SSE’s earnings is 2.35%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of £1.17 in the final year of forecast compared to the current £1.58 EPS today. The main reason for growth is a result of cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. However, the near term margin expansion is expected to shrink heading into 2020, from the current levels of 5.51% to 4.88%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For SSE, I’ve put together three essential aspects you should further examine:

1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

2. Valuation: What is SSE worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether SSE is currently mispriced by the market.

3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of SSE? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

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