Victrex plc Just Missed Earnings - But Analysts Have Updated Their Models

Investors in Victrex plc (LON:VCT) had a good week, as its shares rose 3.0% to close at UK£21.66 following the release of its yearly results. It was not a great result overall. While revenues of UK£266m were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 18% to hit UK£0.63 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Victrex

After the latest results, the 14 analysts covering Victrex are now predicting revenues of UK£273.6m in 2021. If met, this would reflect a satisfactory 2.8% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 33% to UK£0.83. Yet prior to the latest earnings, the analysts had been anticipated revenues of UK£274.9m and earnings per share (EPS) of UK£0.85 in 2021. 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.

The consensus price target held steady at UK£19.69, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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 Victrex at UK£24.00 per share, while the most bearish prices it at UK£17.00. 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.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We can infer from the latest estimates that forecasts expect a continuation of Victrex'shistorical trends, as next year's 2.8% revenue growth is roughly in line with 3.2% annual revenue growth over the past five years. Compare this with the wider industry (in aggregate), which analyst estimates suggest will see revenues grow 6.2% next year. So it's pretty clear that Victrex is expected to grow slower than similar companies in the same industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Victrex. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Victrex's revenues are expected to perform worse than the wider industry. The consensus price target held steady at UK£19.69, with the latest estimates not enough to have an impact on their price targets.

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. We have estimates - from multiple Victrex analysts - going out to 2025, and you can see them free on our platform here.

You still need to take note of risks, for example - Victrex has 1 warning sign we think 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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