A2A S.p.A. Just Beat Revenue By 19%: Here's What Analysts Think Will Happen Next

It's been a good week for A2A S.p.A. (BIT:A2A) shareholders, because the company has just released its latest third-quarter results, and the shares gained 8.1% to €1.23. A2A beat revenue forecasts by a solid 19% to hit €1.6b. Statutory earnings per share came in at €0.12, in line with 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for A2A

Taking into account the latest results, the consensus forecast from A2A's four analysts is for revenues of €7.27b in 2021, which would reflect a decent 11% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to sink 14% to €0.099 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of €7.27b and earnings per share (EPS) of €0.094 in 2021. So the consensus seems to have become somewhat more optimistic on A2A's earnings potential following these results.

The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 5.4% to €1.58. 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. There are some variant perceptions on A2A, with the most bullish analyst valuing it at €1.70 and the most bearish at €1.35 per share. This is a very narrow spread of estimates, implying either that A2A is an easy company to value, or - more likely - the analysts are relying heavily on some key 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. We can infer from the latest estimates that forecasts expect a continuation of A2A'shistorical trends, as next year's 11% revenue growth is roughly in line with 9.6% annual revenue growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 2.8% next year. So it's pretty clear that A2A is forecast to grow substantially faster than its industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around A2A's earnings potential next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster 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 forecasts for A2A going out to 2024, 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 2 warning signs for A2A that you need to be mindful of.

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