Last week saw the newest half-year earnings release from United Utilities Group PLC (LON:UU.), an important milestone in the company's journey to build a stronger business. Earnings per share fell badly short of expectations, coming in at UK£0.23, some 21% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at UK£936m. 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 collected the latest post-earnings consensus estimates to see what could be in store for next year.
Following last week's earnings report, United Utilities Group's 14 analysts are forecasting 2020 revenues to be UK£1.87b, approximately in line with the last 12 months. Earnings per share are expected to soar 31% to UK£0.59. In the lead-up to this report, analysts had been modelling revenues of UK£1.87b and earnings per share (EPS) of UK£0.59 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at UK£8.33. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. The most optimistic United Utilities Group analyst has a price target of UK£9.40 per share, while the most pessimistic values it at UK£6.60. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await United Utilities Group shareholders.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Analysts are definitely expecting United Utilities Group's growth to accelerate, with the forecast 1.6% growth ranking favourably alongside historical growth of 1.3% per annum over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 0.4% next year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect United Utilities Group to grow faster than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. The consensus price target held steady at UK£8.33, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for United Utilities Group going out to 2024, and you can see them free on our platform here..
It might also be worth considering whether United Utilities Group's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.