Last week, you might have seen that Red Eléctrica Corporación, S.A. (BME:REE) released its full-year result to the market. The early response was not positive, with shares down 8.3% to €17.93 in the past week. It was an okay result overall, with revenues coming in at €2.1b, roughly what analysts had been expecting. 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. So we gathered the latest post-earnings forecasts to see what analysts’ statutory forecasts suggest is in store for next year.
Taking into account the latest results, Red Eléctrica Corporación’s ten analysts currently expect revenues in 2020 to be €2.08b, approximately in line with the last 12 months. Statutory earnings per share are expected to shrink 4.6% to €1.26 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of €2.09b and earnings per share (EPS) of €1.27 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 €18.23, suggesting that the company has met expectations in its recent result. 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 Red Eléctrica Corporación, with the most bullish analyst valuing it at €22.20 and the most bearish at €15.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
In addition, we can look to Red Eléctrica Corporación’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 Red Eléctrica Corporación’s revenue growth is expected to slow, with forecast 0.5% increase next year well below the historical 1.4%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 4.3% per year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Red Eléctrica Corporación to grow slower than the wider market.
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. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have estimates – from multiple Red Eléctrica Corporación analysts – going out to 2024, and you can see them free on our platform here.
It might also be worth considering whether Red Eléctrica Corporación’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 email@example.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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