What You Need To Know About The ACS, Actividades de Construcción y Servicios, S.A. (BME:ACS) Analyst Downgrade Today

Market forces rained on the parade of ACS, Actividades de Construcción y Servicios, S.A. (BME:ACS) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. At €31.94, shares are up 4.2% in the past 7 days. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following the downgrade, the consensus from twelve analysts covering ACS Actividades de Construcción y Servicios is for revenues of €31b in 2023, implying a chunky 12% decline in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of €35b in 2023. It looks like forecasts have become a fair bit less optimistic on ACS Actividades de Construcción y Servicios, given the measurable cut to revenue estimates.

See our latest analysis for ACS Actividades de Construcción y Servicios

We'd point out that there was no major changes to their price target of €31.35, suggesting the latest estimates were not enough to shift their view on the value of the business. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on ACS Actividades de Construcción y Servicios, with the most bullish analyst valuing it at €40.00 and the most bearish at €24.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

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. Over the past five years, revenues have declined around 4.5% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 23% decline in revenue until the end of 2023. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 3.3% annually. So while a broad number of companies are forecast to grow, unfortunately ACS Actividades de Construcción y Servicios is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They also expect company revenue to perform worse than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on ACS Actividades de Construcción y Servicios after today.

Unfortunately, by using these new estimates as a starting point, we've run a discounted cash flow calculation (DCF) on ACS Actividades de Construcción y Servicios that suggests the company could be somewhat overvalued. Find out why, and see how we estimate the valuation for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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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.