Stock Analysis

Results: National Bank of Canada Exceeded Expectations And The Consensus Has Updated Its Estimates

TSX:NA
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A week ago, National Bank of Canada (TSE:NA) came out with a strong set of first-quarter numbers that could potentially lead to a re-rate of the stock. It was a solid earnings report, with revenues and statutory earnings per share (EPS) both coming in strong. Revenues were 10% higher than the analysts had forecast, at CA$2.5b, while EPS were CA$2.65 beating analyst models by 22%. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for National Bank of Canada

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TSX:NA Earnings and Revenue Growth March 1st 2022

Taking into account the latest results, the current consensus from National Bank of Canada's eleven analysts is for revenues of CA$9.69b in 2022, which would reflect a satisfactory 4.8% increase on its sales over the past 12 months. Statutory per share are forecast to be CA$9.58, approximately in line with the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of CA$9.37b and earnings per share (EPS) of CA$8.98 in 2022. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.

Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of CA$111, suggesting that the forecast performance does not have a long term impact on the company's valuation. 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. Currently, the most bullish analyst values National Bank of Canada at CA$119 per share, while the most bearish prices it at CA$86.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The period to the end of 2022 brings more of the same, according to the analysts, with revenue forecast to display 6.5% growth on an annualised basis. That is in line with its 7.4% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 5.0% per year. So although National Bank of Canada is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around National Bank of Canada's earnings potential next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target held steady at CA$111, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for National Bank of Canada going out to 2023, and you can see them free on our platform here.

You can also see our analysis of National Bank of Canada's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

Valuation is complex, but we're helping make it simple.

Find out whether National Bank of Canada is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.