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Bright Horizons Family Solutions Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

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Shareholders in Bright Horizons Family Solutions Inc. (NYSE:BFAM) had a terrible week, as shares crashed 26% to US$80.32 in the week since its latest first-quarter results. Revenues of US$460m fell slightly short of expectations, but earnings were a definite bright spot, with statutory per-share profits of US$0.33 an impressive 42% ahead of estimates. 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Bright Horizons Family Solutions

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Taking into account the latest results, the most recent consensus for Bright Horizons Family Solutions from eight analysts is for revenues of US$2.04b in 2022 which, if met, would be a meaningful 12% increase on its sales over the past 12 months. Statutory earnings per share are predicted to shoot up 79% to US$2.48. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.10b and earnings per share (EPS) of US$2.51 in 2022. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.

It will come as no surprise then, that the consensus price target fell 15% to US$127following these changes. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Bright Horizons Family Solutions at US$155 per share, while the most bearish prices it at US$91.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Bright Horizons Family Solutions' past performance and to peers in the same industry. For example, we noticed that Bright Horizons Family Solutions' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 16% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 0.9% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 6.8% per year. So it looks like Bright Horizons Family Solutions is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

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 Bright Horizons Family Solutions going out to 2024, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for Bright Horizons Family Solutions that we have uncovered.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

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