Meggitt PLC (LON:MGGT) shareholders are probably feeling a little disappointed, since its shares fell 2.1% to UK£2.81 in the week after its latest half-year results. Revenues were in line with expectations, at UK£917m, while statutory losses ballooned to UK£0.44 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
After the latest results, the consensus from Meggitt's 17 analysts is for revenues of UK£1.77b in 2020, which would reflect an uneasy 17% decline in sales compared to the last year of performance. Earnings are expected to tip over into lossmaking territory, with the analysts forecasting statutory losses of -UK£0.14 per share in 2020. Before this earnings report, the analysts had been forecasting revenues of UK£1.82b and earnings per share (EPS) of UK£0.015 in 2020. There looks to have been a significant drop in sentiment regarding Meggitt's prospects after these latest results, with a small dip in revenues and the analysts now forecasting a loss instead of a profit.
The average price target was broadly unchanged at UK£3.47, perhaps implicitly signalling that the weaker earnings outlook is not expected to have a long-term impact on the valuation. 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 Meggitt, with the most bullish analyst valuing it at UK£5.60 and the most bearish at UK£2.41 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 17% revenue decline a notable change from historical growth of 6.1% 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 5.3% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Meggitt is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts are expecting Meggitt to become unprofitable next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at UK£3.47, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Meggitt going out to 2024, and you can see them free on our platform here..
However, before you get too enthused, we've discovered 2 warning signs for Meggitt (1 is a bit unpleasant!) that you should be aware of.
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. 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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