Investors in Waste Connections, Inc. (NYSE:WCN) had a good week, as its shares rose 3.9% to close at US$104 following the release of its annual results. Results were roughly in line with estimates, with revenues of US$5.4b and statutory earnings per share of US$2.14. 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. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Following the latest results, Waste Connections's 15 analysts are now forecasting revenues of US$5.81b in 2020. This would be a modest 7.7% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to swell 18% to US$2.53. Yet prior to the latest earnings, analysts had been forecasting revenues of US$5.83b and earnings per share (EPS) of US$2.58 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$108, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. There are some variant perceptions on Waste Connections, with the most bullish analyst valuing it at US$137 and the most bearish at US$63.00 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. We would highlight that Waste Connections's revenue growth is expected to slow, with forecast 7.7% increase next year well below the historical 21%p.a. growth over the last five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.3% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkWaste Connections will grow faster than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. 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.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Waste Connections going out to 2024, and you can see them free on our platform here.
It might also be worth considering whether Waste Connections's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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