Renishaw plc Just Beat Revenue Estimates By 5.0%

Investors in Renishaw plc (LON:RSW) had a good week, as its shares rose 2.6% to close at UK£61.55 following the release of its half-year results. It was a workmanlike result, with revenues of UK£255m coming in 5.0% ahead of expectations, and statutory earnings per share of UK£0.004, 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Renishaw

Taking into account the latest results, the current consensus from Renishaw's nine analysts is for revenues of UK£526.9m in 2021, which would reflect an okay 4.1% increase on its sales over the past 12 months. Per-share earnings are expected to jump 101% to UK£1.25. Before this earnings report, the analysts had been forecasting revenues of UK£531.6m and earnings per share (EPS) of UK£0.98 in 2021. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the very substantial lift in earnings per share expectations following these results.

The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 8.5% to UK£50.62. 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 Renishaw analyst has a price target of UK£66.00 per share, while the most pessimistic values it at UK£41.00. 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.

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. The analysts are definitely expecting Renishaw's growth to accelerate, with the forecast 4.1% growth ranking favourably alongside historical growth of 3.0% 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 6.9% per year. So it's clear that despite the acceleration in growth, Renishaw is expected to grow meaningfully slower than the industry average.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Renishaw's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Renishaw's revenues are expected to perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Renishaw analysts - going out to 2024, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Renishaw that you should be aware of.

If you’re looking to trade Renishaw, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.