Results: Inghams Group Limited Beat Earnings Expectations And Analysts Now Have New Forecasts
Inghams Group Limited (ASX:ING) defied analyst predictions to release its interim results, which were ahead of market expectations. Results were good overall, with revenues beating analyst predictions by 4.6% to hit AU$1.3b. Statutory earnings per share (EPS) came in at AU$0.33, some 9.6% above what analysts had expected. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Inghams Group after the latest results.
See our latest analysis for Inghams Group
Taking into account the latest results, the most recent consensus for Inghams Group from eight analysts is for revenues of AU$2.59b in 2020, which is a satisfactory 2.0% increase on its sales over the past 12 months. Statutory earnings per share are expected to bounce 22% to AU$0.22. Yet prior to the latest earnings, analysts had been forecasting revenues of AU$2.58b and earnings per share (EPS) of AU$0.24 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at AU$3.54, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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 Inghams Group at AU$4.00 per share, while the most bearish prices it at AU$3.10. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. We can infer from the latest estimates that analysts are expecting a continuation of Inghams Group's historical trends, as next year's forecast 2.0% revenue growth is roughly in line with 1.9% annual revenue growth over the past three years. Compare this with the wider market (in aggregate), which analyst estimates suggest will see revenues fall 10% next year. So although Inghams Group is expected to maintain its revenue growth rate, it's forecast to grow slower than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Inghams Group. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Inghams Group's revenues are expected to perform worse than the wider market. The consensus price target held steady at AU$3.54, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Inghams Group analysts - going out to 2022, and you can see them free on our platform here.
It might also be worth considering whether Inghams Group'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.
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