Suncorp Group Limited (ASX:SUN) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The consensus estimated revenue numbers rose, with their view now clearly much more bullish on the company's business prospects. The stock price has risen 8.4% to AU$12.79 over the past week, suggesting investors are becoming more optimistic. Could this big upgrade push the stock even higher?
After the upgrade, the consensus from Suncorp Group's ten analysts is for revenues of AU$10b in 2022, which would reflect a disturbing 26% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to descend 10% to AU$0.73 in the same period. Prior to this update, the analysts had been forecasting revenues of AU$8.9b and earnings per share (EPS) of AU$0.70 in 2022. The forecasts seem more optimistic now, with a solid increase in revenue and a small lift in earnings per share estimates.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 7.0% to AU$12.81 per share. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Suncorp Group, with the most bullish analyst valuing it at AU$14.21 and the most bearish at AU$10.77 per share. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. Over the past five years, revenues have declined around 2.3% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 26% decline in revenue until the end of 2022. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 5.0% annually. So while a broad number of companies are forecast to grow, unfortunately Suncorp Group is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Given that analysts appear to be expecting substantial improvement in the sales pipeline, now could be the right time to take another look at Suncorp Group.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Suncorp Group going out to 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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