Babcock International Group PLC (LON:BAB) Just Released Its Interim Earnings: Here's What Analysts Think

Investors in Babcock International Group PLC (LON:BAB) had a good week, as its shares rose 2.2% to close at UK£3.10 following the release of its half-yearly results. 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Babcock International Group

Taking into account the latest results, Babcock International Group's ten analysts currently expect revenues in 2022 to be UK£4.31b, approximately in line with the last 12 months. Babcock International Group is also expected to turn profitable, with statutory earnings of UK£0.18 per share. Before this earnings report, the analysts had been forecasting revenues of UK£4.20b and earnings per share (EPS) of UK£0.16 in 2022. So it seems there's been a definite increase in optimism about Babcock International Group's future following the latest results, with a nice gain to the earnings per share forecasts in particular.

Despite these upgrades,the analysts have not made any major changes to their price target of UK£3.75, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. 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. The most optimistic Babcock International Group analyst has a price target of UK£5.00 per share, while the most pessimistic values it at UK£2.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One more thing stood out to us about these estimates, and it's the idea that Babcock International Group's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 2.1% to the end of 2022. This tops off a historical decline of 1.5% a year 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 revenue grow 5.2% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Babcock International Group to suffer 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 Babcock International Group following these results. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. The consensus price target held steady at UK£3.75, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Babcock International Group. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Babcock International Group analysts - going out to 2024, and you can see them free on our platform here.

You can also see whether Babcock International Group is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.

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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.