Barratt Developments PLC (LON:BDEV) just released its latest half-yearly results and things are looking bullish. The company beat expectations with revenues of UK£2.3b arriving 5.5% ahead of forecasts. Statutory earnings per share (EPS) were UK£0.72, 2.3% ahead of estimates. Following the result, 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. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, Barratt Developments's 16 analysts currently expect revenues in 2020 to be UK£4.95b, approximately in line with the last 12 months. Statutory per share are forecast to be UK£0.74, approximately in line with the last 12 months. Before this earnings report, analysts had been forecasting revenues of UK£4.87b and earnings per share (EPS) of UK£0.72 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.
There's been no major changes to the consensus price target of UK£8.17, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's 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. Currently, the most bullish analyst values Barratt Developments at UK£9.75 per share, while the most bearish prices it at UK£7.00. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. It's pretty clear that analysts expect Barratt Developments's revenue growth will slow down substantially, with revenues next year expected to grow 1.0%, compared to a historical growth rate of 6.6% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 5.0% per year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Barratt Developments.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Barratt Developments following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Barratt Developments's revenues are expected to perform worse 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 Barratt Developments going out to 2023, and you can see them free on our platform here.
We also provide an overview of the Barratt Developments Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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