WH Smith PLC (LON:SMWH) Just Reported Interim Earnings: Have Analysts Changed Their Mind On The Stock?

The half-year results for WH Smith PLC (LON:SMWH) were released last week, making it a good time to revisit its performance. Revenues were UK£420m, and WH Smith came in a solid 18% ahead of expectations. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for WH Smith

After the latest results, the nine analysts covering WH Smith are now predicting revenues of UK£983.3m in 2021. If met, this would reflect a substantial 42% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 84% to UK£0.40. Before this latest report, the consensus had been expecting revenues of UK£938.8m and UK£0.46 per share in losses. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a notable improvement in loss per share in particular.

Despite these upgrades,the analysts have not made any major changes to their price target of UK£19.90, implying that their latest estimates don't have a long term impact on what they think the stock is worth. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values WH Smith at UK£24.50 per share, while the most bearish prices it at UK£15.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await WH Smith shareholders.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. For example, we noticed that WH Smith's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 101% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 2.6% 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 6.6% annually. Not only are WH Smith'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 obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues 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 said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for WH Smith going out to 2025, 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 WH Smith that you need to be mindful 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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