Strabag SE (VIE:STR) just released its latest yearly results and things are looking bullish. Results were good overall, with revenues beating analyst predictions by 3.9% to hit €16b. Statutory earnings per share (EPS) came in at €3.62, some 6.8% above whatthe analysts had expected. The 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following the recent earnings report, the consensus from four analysts covering Strabag is for revenues of €14.0b in 2020, implying an uneasy 10% decline in sales compared to the last 12 months. Statutory earnings per share are forecast to fall 17% to €3.01 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of €14.6b and earnings per share (EPS) of €2.98 in 2020. 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 €37.38 even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Strabag, with the most bullish analyst valuing it at €42.90 and the most bearish at €35.00 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
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. We would highlight that sales are expected to reverse, with the forecast 10% revenue decline a notable change from historical growth of 5.4% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 0.9% next year. It's pretty clear that Strabag'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. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Yet - earnings are more important to the intrinsic value of the business. 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.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Strabag going out to 2024, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 3 warning signs for Strabag that you should be aware of.
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