Sopra Steria Group SA Just Missed Earnings And Its Revenue Numbers Were Weaker Than Expected

The half-year results for Sopra Steria Group SA (EPA:SOP) were released last week, making it a good time to revisit its performance. Results look mixed - while revenue fell marginally short of analyst estimates at €2.9b, statutory earnings were in line with expectations, at €9.08 per share. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Sopra Steria Group

Taking into account the latest results, the seven analysts covering Sopra Steria Group provided consensus estimates of €5.84b revenue in 2024, which would reflect a discernible 4.0% decline over the past 12 months. Per-share earnings are expected to jump 32% to €14.67. In the lead-up to this report, the analysts had been modelling revenues of €6.31b and earnings per share (EPS) of €15.85 in 2024. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a small dip in earnings per share estimates.

The consensus price target fell 7.4% to €246, with the weaker earnings outlook clearly leading valuation estimates. 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. There are some variant perceptions on Sopra Steria Group, with the most bullish analyst valuing it at €263 and the most bearish at €212 per share. This is a very narrow spread of estimates, implying either that Sopra Steria Group is an easy company to value, or - more likely - the analysts are relying heavily on some key 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. We would highlight that revenue is expected to reverse, with a forecast 7.8% annualised decline to the end of 2024. That is a notable change from historical growth of 7.3% 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 5.3% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Sopra Steria Group is expected to lag the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Sopra Steria Group. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Sopra Steria Group's future valuation.

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. At Simply Wall St, we have a full range of analyst estimates for Sopra Steria Group going out to 2026, and you can see them free on our platform here..

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Sopra Steria Group , and understanding these should be part of your investment process.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com