Federal Signal Corporation Just Beat EPS By 19%: Here's What Analysts Think Will Happen Next

Investors in Federal Signal Corporation (NYSE:FSS) had a good week, as its shares rose 8.0% to close at US$99.30 following the release of its second-quarter results. It looks like a credible result overall - although revenues of US$490m were in line with what the analysts predicted, Federal Signal surprised by delivering a statutory profit of US$0.99 per share, a notable 19% above 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Federal Signal

Taking into account the latest results, the most recent consensus for Federal Signal from seven analysts is for revenues of US$1.87b in 2024. If met, it would imply an okay 3.6% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to rise 6.8% to US$3.53. Before this earnings report, the analysts had been forecasting revenues of US$1.87b and earnings per share (EPS) of US$3.23 in 2024. So the consensus seems to have become somewhat more optimistic on Federal Signal's earnings potential following these results.

The consensus price target was unchanged at US$93.00, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. Currently, the most bullish analyst values Federal Signal at US$105 per share, while the most bearish prices it at US$82.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Federal Signal is an easy business to forecast or the the analysts are all using similar assumptions.

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. We would highlight that Federal Signal's revenue growth is expected to slow, with the forecast 7.3% annualised growth rate until the end of 2024 being well below the historical 9.6% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 3.5% per year. Even after the forecast slowdown in growth, it seems obvious that Federal Signal is also expected to grow faster than the wider industry.

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 Federal Signal following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting that it's tracking in line with expectations. Additionally, our data suggests that revenue is 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 Federal Signal. Long-term earnings power is much more important than next year's profits. We have forecasts for Federal Signal going out to 2026, and you can see them free on our platform here.

You can also view our analysis of Federal Signal's balance sheet, and whether we think Federal Signal is carrying too much debt, for free on our platform here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

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