The Weir Group PLC (LON:WEIR) came out with its annual 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 UK£1.9b were what the analysts expected, Weir Group surprised by delivering a (statutory) profit of UK£0.99 per share, an impressive 87% above what was forecast. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the consensus forecast from Weir Group's 17 analysts is for revenues of UK£2.19b in 2022, which would reflect a solid 13% improvement in sales compared to the last 12 months. Per-share earnings are expected to shoot up 31% to UK£0.78. Yet prior to the latest earnings, the analysts had been anticipated revenues of UK£2.19b and earnings per share (EPS) of UK£0.81 in 2022. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.
It might be a surprise to learn that the consensus price target was broadly unchanged at UK£20.21, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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 Weir Group analyst has a price target of UK£24.70 per share, while the most pessimistic values it at UK£13.50. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Weir Group's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 13% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 0.9% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 6.1% annually. Not only are Weir Group's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Weir Group. Long-term earnings power is much more important than next year's profits. We have forecasts for Weir Group going out to 2024, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 1 warning sign for Weir Group that you need to be mindful of.
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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.