Earnings Update: Rentokil Initial plc (LON:RTO) Just Reported Its Half-Year Results And Analysts Are Updating Their Forecasts

It's been a good week for Rentokil Initial plc (LON:RTO) shareholders, because the company has just released its latest half-year results, and the shares gained 7.1% to UK£5.67. It was a workmanlike result, with revenues of UK£1.5b coming in 4.5% ahead of expectations, and statutory earnings per share of UK£0.10, in line with analyst appraisals. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for Rentokil Initial

Taking into account the latest results, Rentokil Initial's 13 analysts currently expect revenues in 2021 to be UK£2.99b, approximately in line with the last 12 months. Statutory earnings per share are forecast to decrease 6.3% to UK£0.13 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of UK£2.99b and earnings per share (EPS) of UK£0.12 in 2021. So the consensus seems to have become somewhat more optimistic on Rentokil Initial's earnings potential following these results.

The consensus price target was unchanged at UK£5.81, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. The most optimistic Rentokil Initial analyst has a price target of UK£6.50 per share, while the most pessimistic values it at UK£4.15. 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.

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. We would highlight that sales are expected to reverse, with a forecast 0.1% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 6.9% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 6.9% annually for the foreseeable future. It's pretty clear that Rentokil Initial'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 Rentokil Initial following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at UK£5.81, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Rentokil Initial analysts - going out to 2023, and you can see them free on our platform here.

You still need to take note of risks, for example - Rentokil Initial has 1 warning sign we think you should be aware of.

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