Pennon Group Plc Just Beat Revenue By 5.1%: Here's What Analysts Think Will Happen Next

Shareholders might have noticed that Pennon Group Plc (LON:PNN) filed its half-yearly result this time last week. The early response was not positive, with shares down 4.1% to UK£9.44 in the past week. Results overall were respectable, with statutory earnings of UK£0.049 per share roughly in line with what the analysts had forecast. Revenues of UK£426m came in 5.1% ahead of analyst predictions. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Pennon Group

Taking into account the latest results, the current consensus, from the ten analysts covering Pennon Group, is for revenues of UK£779.2m in 2023, which would reflect a perceptible 5.8% reduction in Pennon Group's sales over the past 12 months. Statutory earnings per share are expected to decrease 8.4% to UK£0.20 in the same period. In the lead-up to this report, the analysts had been modelling revenues of UK£822.0m and earnings per share (EPS) of UK£0.19 in 2023. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.

There's been no real change to the average price target of UK£10.25, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. 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. The most optimistic Pennon Group analyst has a price target of UK£13.00 per share, while the most pessimistic values it at UK£6.50. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Pennon Group's past performance and to peers in the same industry. One thing that stands out from these estimates is that shrinking revenues are expected to moderate over the period ending 2023 compared to the historical decline of 16% per annum over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 7.2% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Pennon Group to suffer worse than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Pennon Group's earnings potential next year. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. With that said, earnings are more important to the long-term value of the business. 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. At Simply Wall St, we have a full range of analyst estimates for Pennon Group going out to 2025, and you can see them free on our platform here..

Plus, you should also learn about the 2 warning signs we've spotted with Pennon Group .

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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.

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