Serco Group plc Just Recorded A 28% EPS Beat: Here's What Analysts Are Forecasting Next

Investors in Serco Group plc (LON:SRP) had a good week, as its shares rose 6.8% to close at UK£1.30 following the release of its annual results. It looks like a credible result overall - although revenues of UK£3.9b were what the analysts expected, Serco Group surprised by delivering a (statutory) profit of UK£0.11 per share, an impressive 28% above what was forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. 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 Serco Group

Taking into account the latest results, the current consensus from Serco Group's eleven analysts is for revenues of UK£4.18b in 2021, which would reflect a credible 7.5% increase on its sales over the past 12 months. Statutory earnings per share are forecast to nosedive 22% to UK£0.085 in the same period. Before this earnings report, the analysts had been forecasting revenues of UK£4.09b and earnings per share (EPS) of UK£0.078 in 2021. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.

Despite these upgrades,the analysts have not made any major changes to their price target of UK£1.70, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Serco Group at UK£1.90 per share, while the most bearish prices it at UK£1.50. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Serco Group's growth to accelerate, with the forecast 7.5% growth ranking favourably alongside historical growth of 3.4% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.8% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Serco Group to grow faster 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 Serco Group following these results. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. The consensus price target held steady at UK£1.70, 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. At Simply Wall St, we have a full range of analyst estimates for Serco Group going out to 2025, and you can see them free on our platform here..

Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Serco Group (1 is a bit unpleasant) you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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