Yahoo Finance DS Smith Plc Just Missed EPS By 10.0%: Here's What Analysts Think Will Happen Next
DS Smith Plc (LON:SMDS) missed earnings with its latest half-yearly results, disappointing overly-optimistic analysts. DS Smith missed analyst estimates, with revenues of UK£3.2b and earnings per share (EPS) of UK£0.21, missing by 6.6% and 10.0% respectively. 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. With this in mind, we've gathered the latest forecasts to see what analysts are expecting for next year.
See our latest analysis for DS Smith
Taking into account the latest results, the current consensus from DS Smith's twelve analysts is for revenues of UK£6.45b in 2020, which would reflect a modest 2.6% increase on its sales over the past 12 months. Earnings per share are expected to grow 16% to UK£0.26. In the lead-up to this report, analysts had been modelling revenues of UK£6.79b and earnings per share (EPS) of UK£0.25 in 2020. So it's pretty clear that while sentiment around revenues has declined following the latest results, analysts are now more bullish on the company's earnings power.
There's been no real change to the average price target of UK£4.05, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. 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 DS Smith, with the most bullish analyst valuing it at UK£4.90 and the most bearish at UK£2.80 per share. 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.
Further, we can compare these estimates to past performance, and see how DS Smith forecasts compare to the wider market's forecast performance. It's pretty clear that analysts expect DS Smith's revenue growth will slow down substantially, with revenues next year expected to grow 2.6%, compared to a historical growth rate of 12% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 3.4% 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 DS Smith.
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 DS Smith following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. Still, 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.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple DS Smith analysts - going out to 2023, and you can see them free on our platform here.
It might also be worth considering whether DS Smith'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 editorial-team@simplywallst.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.
