Earnings Update: Macquarie Telecom Group Limited (ASX:MAQ) Just Reported Its Half-Yearly Results And Analysts Are Updating Their Forecasts

As you might know, Macquarie Telecom Group Limited (ASX:MAQ) recently reported its half-year numbers. It was a credible result overall, with revenues of AU$144m and statutory earnings per share of AU$0.63 both in line with analyst estimates, showing that Macquarie Telecom Group is executing in line with expectations. The 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for Macquarie Telecom Group

Taking into account the latest results, the consensus forecast from Macquarie Telecom Group's six analysts is for revenues of AU$292.0m in 2021, which would reflect a modest 5.1% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to descend 17% to AU$0.54 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of AU$290.6m and earnings per share (EPS) of AU$0.58 in 2021. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.

It might be a surprise to learn that the consensus price target was broadly unchanged at AU$57.39, with the 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 Macquarie Telecom Group at AU$68.00 per share, while the most bearish prices it at AU$40.40. 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.

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. It's pretty clear that there is an expectation that Macquarie Telecom Group's revenue growth will slow down substantially, with revenues next year expected to grow 5.1%, compared to a historical growth rate of 6.7% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 3.9% next year. So it's pretty clear that, while Macquarie Telecom Group's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Macquarie Telecom Group. Happily, there were no major changes to revenue forecasts, with the business still 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 Macquarie Telecom Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Macquarie Telecom Group analysts - going out to 2025, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 2 warning signs for Macquarie Telecom Group (of which 1 is a bit concerning!) you should know about.

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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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