Results: Warner Music Group Corp. Exceeded Expectations And The Consensus Has Updated Its Estimates

Investors in Warner Music Group Corp. (NASDAQ:WMG) had a good week, as its shares rose 2.9% to close at US$32.72 following the release of its quarterly results. Revenues were US$1.7b, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.45, an impressive 34% ahead of estimates. 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.

Check out our latest analysis for Warner Music Group

Taking into account the latest results, the most recent consensus for Warner Music Group from 17 analysts is for revenues of US$6.50b in 2025. If met, it would imply a credible 2.4% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to jump 37% to US$1.33. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$6.55b and earnings per share (EPS) of US$1.25 in 2025. So the consensus seems to have become somewhat more optimistic on Warner Music Group's earnings potential following these results.

There's been no major changes to the consensus price target of US$35.46, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Warner Music Group, with the most bullish analyst valuing it at US$44.00 and the most bearish at US$23.00 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Warner Music Group's past performance and to peers in the same industry. It's pretty clear that there is an expectation that Warner Music Group's revenue growth will slow down substantially, with revenues to the end of 2025 expected to display 3.2% growth on an annualised basis. This is compared to a historical growth rate of 8.2% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 9.4% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Warner Music Group.

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 Warner Music Group following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse 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.

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 Warner Music Group analysts - going out to 2027, 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 Warner Music Group , and understanding them should be part of your investment process.

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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.