Stantec Inc. (TSE:STN) just released its latest quarterly report and things are not looking great. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at CA$879m, statutory earnings missed forecasts by 11%, coming in at just CA$0.46 per share. Following the result, the 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus from Stantec's ten analysts is for revenues of CA$3.80b in 2021, which would reflect an okay 3.0% increase on its sales over the past 12 months. Statutory earnings per share are predicted to leap 58% to CA$2.26. In the lead-up to this report, the analysts had been modelling revenues of CA$3.82b and earnings per share (EPS) of CA$2.20 in 2021. So the consensus seems to have become somewhat more optimistic on Stantec's earnings potential following these results.
The consensus price target was unchanged at CA$60.18, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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 Stantec, with the most bullish analyst valuing it at CA$67.00 and the most bearish at CA$51.00 per share. This is a very narrow spread of estimates, implying either that Stantec is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Stantec's revenue growth is expected to slow, with the forecast 4.1% annualised growth rate until the end of 2021 being well below the historical 6.8% p.a. growth over the last five years. Compare this to the 9 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 4.4% per year. Factoring in the forecast slowdown in growth, it looks like Stantec is forecast to grow at about the same rate as the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Stantec's earnings potential next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. 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. We have forecasts for Stantec going out to 2022, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 1 warning sign for Stantec you should know about.
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 editorial-team (at) simplywallst.com.