Investors in easyJet plc (LON:EZJ) had a good week, as its shares rose 3.5% to close at UK£13.48 following the release of its full-year results. It was a credible result overall, with revenues of UK£6.4b and earnings per share of UK£0.88 both in line with analyst estimates, showing that easyJet is executing in line with expectations. 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 thought readers would find it interesting to see analysts' latest post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for easyJet from 23 analysts is for revenues of UK£6.74b in 2020, which is a reasonable 5.5% increase on its sales over the past 12 months. Earnings per share are expected to increase 5.3% to UK£0.93. Before this earnings report, analysts had been forecasting revenues of UK£6.74b and earnings per share (EPS) of UK£0.93 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.
The consensus price target rose 5.4% to UK£12.67 despite there being no meaningful change to earnings estimates. It could be that analysts are reflecting the predictability of easyJet's earnings by assigning a price premium. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on easyJet, with the most bullish analyst valuing it at UK£15.00 and the most bearish at UK£9.50 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
In addition, we can look to easyJet's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. We would highlight that easyJet's revenue growth is expected to slow, with forecast 5.5% increase next year well below the historical 7.3%p.a. growth over the last five years. Compare this to the other companies in this market with analyst coverage, which are forecast to grow their revenue at 6.5% per year. So it's pretty clear that, while easyJet's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for easyJet going out to 2024, and you can see them free on our platform here..
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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