One of the biggest stories of last week was how WPP plc (LON:WPP) shares plunged 22% in the week since its latest full-year results, closing yesterday at UK£7.53. Sales of UK£13b surpassed estimates by 4.8%, although statutory earnings per share missed badly, coming in 37% below expectations at UK£0.49 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on WPP after the latest results.
Following the recent earnings report, the consensus from16 analysts covering WPP expects revenues of UK£11.0b in 2020, implying an uneasy 17% decline in sales compared to the last 12 months. Statutory earnings per share are expected to jump 54% to UK£0.78. In the lead-up to this report, analysts had been modelling revenues of UK£11.1b and earnings per share (EPS) of UK£0.78 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.
There were no changes to revenue or earnings estimates or the price target of UK£10.71, suggesting that the company has met expectations in its recent result. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic WPP analyst has a price target of UK£15.20 per share, while the most pessimistic values it at UK£6.85. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. These estimates imply that sales are expected to slow, with a forecast revenue decline of 17% a significant reduction from annual growth of 6.2% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 2.9% next year. It's pretty clear that WPP's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that WPP's revenues are expected to perform worse than the wider market. The consensus price target held steady at UK£10.71, with the latest estimates not enough to have an impact on analysts' estimated valuations.
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 WPP going out to 2022, and you can see them free on our platform here..
You can also view our analysis of WPP's balance sheet, and whether we think WPP is carrying too much debt, for free on our platform here.
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