Severn Trent Plc Just Missed EPS By 12%: Here's What Analysts Think Will Happen Next

Last week saw the newest full-year earnings release from Severn Trent Plc (LON:SVT), an important milestone in the company's journey to build a stronger business. Statutory earnings per share of UK£0.89 unfortunately missed expectations by 12%, although it was encouraging to see revenues of UK£1.8b exceed expectations by 2.4%. 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.

See our latest analysis for Severn Trent

Taking into account the latest results, Severn Trent's eleven analysts currently expect revenues in 2022 to be UK£1.86b, approximately in line with the last 12 months. Per-share earnings are expected to surge 29% to UK£1.15. Before this earnings report, the analysts had been forecasting revenues of UK£1.85b and earnings per share (EPS) of UK£1.22 in 2022. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.

It might be a surprise to learn that the consensus price target was broadly unchanged at UK£24.11, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Severn Trent at UK£28.00 per share, while the most bearish prices it at UK£21.48. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

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. The period to the end of 2022 brings more of the same, according to the analysts, with revenue forecast to display 1.9% growth on an annualised basis. That is in line with its 2.1% annual growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 2.1% per year. So although Severn Trent is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target held steady at UK£24.11, with the latest estimates not enough to have an impact on their price targets.

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 Severn Trent analysts - going out to 2025, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Severn Trent (at least 1 which is concerning) , and understanding these should be part of your investment process.

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