Revenue Beat: Intact Financial Corporation Exceeded Revenue Forecasts By 11% And Analysts Are Updating Their Estimates

By
Simply Wall St
Published
February 06, 2020
TSX:IFC
Source: Shutterstock

It's been a good week for Intact Financial Corporation (TSE:IFC) shareholders, because the company has just released its latest full-year results, and the shares gained 7.0% to CA$153. Intact Financial beat revenue forecasts by a solid 11% to hit CA$11b. Statutory earnings per share came in at CA$5.08, in line with expectations. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Intact Financial after the latest results.

See our latest analysis for Intact Financial

TSX:IFC Past and Future Earnings, February 7th 2020
TSX:IFC Past and Future Earnings, February 7th 2020

Following the latest results, Intact Financial's ten analysts are now forecasting revenues of CA$11.6b in 2020. This would be a modest 2.6% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to shoot up 42% to CA$7.21. In the lead-up to this report, analysts had been modelling revenues of CA$11.4b and earnings per share (EPS) of CA$7.76 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at CA$155, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on 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. Currently, the most bullish analyst values Intact Financial at CA$164 per share, while the most bearish prices it at CA$145. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.

Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. It's pretty clear that analysts expect Intact Financial's revenue growth will slow down substantially, with revenues next year expected to grow 2.6%, compared to a historical growth rate of 8.0% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 1.1% next year. So it's pretty clear that, while Intact Financial's revenue growth is expected to slow, it's still expected to grow faster than the market itself.

The Bottom Line

The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. The consensus price target held steady at CA$155, with the latest estimates not enough to have an impact on analysts' estimated valuations.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Intact Financial analysts - going out to 2021, and you can see them free on our platform here.

It might also be worth considering whether Intact Financial'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 editorial-team@simplywallst.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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.