It's shaping up to be a tough period for American States Water Company (NYSE:AWR), which a week ago released some disappointing quarterly results that could have a notable impact on how the market views the stock. It looks like a weak result overall, with both revenues and earnings falling well short of analyst predictions. Revenues of US$134m missed by 12%, and statutory earnings per share of US$0.72 fell short of forecasts by 5.5%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the most recent consensus for American States Water from four analysts is for revenues of US$496.9m in 2021 which, if met, would be an okay 4.2% increase on its sales over the past 12 months. Statutory earnings per share are predicted to accumulate 7.0% to US$2.40. Before this earnings report, the analysts had been forecasting revenues of US$498.4m and earnings per share (EPS) of US$2.32 in 2021. So the consensus seems to have become somewhat more optimistic on American States Water's earnings potential following these results.
There's been no major changes to the consensus price target of US$82.25, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on American States Water, with the most bullish analyst valuing it at US$93.00 and the most bearish at US$70.00 per share. This is a very narrow spread of estimates, implying either that American States Water is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting American States Water's growth to accelerate, with the forecast 4.2% growth ranking favourably alongside historical growth of 1.2% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 7.4% next year. So it's clear that despite the acceleration in growth, American States Water is expected to grow meaningfully slower than the industry average.
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 American States Water following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues 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.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple American States Water analysts - going out to 2022, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 1 warning sign for American States Water that you should be aware of.
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