Southern Cross Media Group Limited Just Beat Revenue Estimates By 6.5%

Southern Cross Media Group Limited (ASX:SXL) last week reported its latest half-yearly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Results overall were respectable, with statutory earnings of AU$0.18 per share roughly in line with what the analysts had forecast. Revenues of AU$258m came in 6.5% ahead of analyst predictions. Following the result, the 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Southern Cross Media Group

Taking into account the latest results, the most recent consensus for Southern Cross Media Group from six analysts is for revenues of AU$536.6m in 2021 which, if met, would be a solid 9.4% increase on its sales over the past 12 months. Statutory earnings per share are expected to shrink 6.5% to AU$0.16 in the same period. In the lead-up to this report, the analysts had been modelling revenues of AU$519.3m and earnings per share (EPS) of AU$0.13 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a very substantial lift in earnings per share in particular.

Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of AU$2.49, suggesting that the forecast performance does not have a long term impact on the company's 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 Southern Cross Media Group, with the most bullish analyst valuing it at AU$3.80 and the most bearish at AU$1.40 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Southern Cross Media Group's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 9.4%, well above its historical decline of 3.5% a year over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 4.8% next year. Not only are Southern Cross Media Group's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Southern Cross Media Group following these results. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. 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 in mind, we wouldn't be too quick to come to a conclusion on Southern Cross Media Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Southern Cross Media Group analysts - going out to 2023, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Southern Cross Media Group (1 is significant) you should be aware of.

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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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