Stock Analysis

easyJet plc (LON:EZJ) Analysts Are Cutting Their Estimates: Here's What You Need To Know

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easyJet plc (LON:EZJ) shareholders are probably feeling a little disappointed, since its shares fell 3.9% to UK£9.75 in the week after its latest half-yearly results. Revenues were UK£240m, with easyJet reporting some 2.9% below analyst expectations. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. 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 easyJet

LSE:EZJ Earnings and Revenue Growth May 22nd 2021

Taking into account the latest results, the consensus forecast from easyJet's 19 analysts is for revenues of UK£1.76b in 2021, which would reflect a huge 103% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 42% to UK£1.74. Yet prior to the latest earnings, the analysts had been forecasting revenues of UK£1.90b and losses of UK£1.69 per share in 2021. Overall it looks as though the analysts are negative in this update. Although sales forecasts held steady, the consensus also made a modest increase to to its losses per share forecasts.

There was no major change to the consensus price target of UK£10.44, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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 easyJet at UK£13.40 per share, while the most bearish prices it at UK£6.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

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. For example, we noticed that easyJet's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 3x growth to the end of 2021 on an annualised basis. That is well above its historical decline of 5.1% 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 33% annually. So it looks like easyJet is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. They also downgraded their revenue estimates, although industry data suggests that easyJet's revenues are expected 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 in mind, we wouldn't be too quick to come to a conclusion on easyJet. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for easyJet going out to 2025, and you can see them free on our platform here..

It is also worth noting that we have found 2 warning signs for easyJet (1 doesn't sit too well with us!) that you need to take into consideration.

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