UBS Group AG (VTX:UBSG) came out with its full-year results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. It looks like a credible result overall - although revenues of US$32b were in line with what the analysts predicted, UBS Group surprised by delivering a statutory profit of US$1.80 per share, a notable 12% above 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus, from the 15 analysts covering UBS Group, is for revenues of US$31.7b in 2021, which would reflect a noticeable 2.2% reduction in UBS Group's sales over the past 12 months. Statutory earnings per share are forecast to crater 24% to US$1.37 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$31.6b and earnings per share (EPS) of US$1.30 in 2021. So the consensus seems to have become somewhat more optimistic on UBS Group's earnings potential following these results.
The consensus price target was unchanged at CHF14.93, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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 UBS Group at CHF16.91 per share, while the most bearish prices it at CHF13.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting UBS Group is an easy business to forecast or the the analysts are all using similar assumptions.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 2.2%, a significant reduction from annual growth of 0.7% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.0% next year. It's pretty clear that UBS Group's revenues are expected to perform substantially worse 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 UBS Group following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that UBS Group's revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$14.93, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for UBS Group going out to 2023, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for UBS Group (1 can't be ignored!) that you should be aware of.
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