Today is shaping up negative for John Wood Group PLC (LON:WG.) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.
Following the latest downgrade, the seven analysts covering John Wood Group provided consensus estimates of US$5.6b revenue in 2022, which would reflect a not inconsiderable 12% decline on its sales over the past 12 months. Before the latest update, the analysts were foreseeing US$6.6b of revenue in 2022. The consensus view seems to have become more pessimistic on John Wood Group, noting the measurable cut to revenue estimates in this update.
We'd point out that there was no major changes to their price target of US$3.15, suggesting the latest estimates were not enough to shift their view on the value of the business. 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. Currently, the most bullish analyst values John Wood Group at US$3.13 per share, while the most bearish prices it at US$1.49. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await John Wood Group shareholders.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 23% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 0.4% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 9.6% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - John Wood Group is expected to lag the wider industry.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for John Wood Group this year. They're also anticipating slower revenue growth than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on John Wood Group after today.
But wait - there's more! We have estimates for John Wood Group from its seven analysts out until 2024, and you can see them free on our platform here.
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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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