As you might know, John Menzies plc (LON:MNZS) last week released its latest annual, and things did not turn out so great for shareholders. Revenues missed expectations somewhat, coming in at UK£824m, but statutory earnings fell catastrophically short, with a loss of UK£1.51 some 365% larger than what the analysts had predicted. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for John Menzies from three analysts is for revenues of UK£950.4m in 2021 which, if met, would be a solid 15% increase on its sales over the past 12 months. Earnings are expected to improve, with John Menzies forecast to report a statutory profit of UK£0.22 per share. In the lead-up to this report, the analysts had been modelling revenues of UK£984.6m and earnings per share (EPS) of UK£0.17 in 2021. While revenue forecasts have been revised downwards, the analysts look to have become more optimistic on the company's cost base, given the massive increase in to the earnings per share numbers.
The average price target rose 26% to UK£3.73, with the analysts signalling that the improved earnings outlook is the key driver of value for shareholders - enough to offset the reduction in revenue estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic John Menzies analyst has a price target of UK£4.15 per share, while the most pessimistic values it at UK£3.31. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting John Menzies is an easy business to forecast or the the analysts are all using similar assumptions.
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. For example, we noticed that John Menzies' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 15% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 14% 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 9.7% annually. So it looks like John Menzies is expected to grow faster than its competitors, at least for a while.
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 John Menzies following these results. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Even so, earnings are more important to the intrinsic value of the business. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on John Menzies. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple John Menzies analysts - going out to 2024, and you can see them free on our platform here.
Even so, be aware that John Menzies is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...
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