Intermediate Capital Group plc (LON: ICP) missed earnings with its latest interim results, disappointing overly-optimistic forecasters. The analysts look to have been far too optimistic in the lead-up to these results, with revenues of (UK£227m) coming in 23% below what they had expected. Statutory earnings per share of UK£0.12 fell 52% short. 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’ve gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus, from the ten analysts covering Intermediate Capital Group, is for revenues of UK£613.3m in 2023, which would reflect a not inconsiderable 9.2% reduction in Intermediate Capital Group’s sales over the past 12 months. Statutory earnings per share are forecast to dive 27% to UK£0.82 in the same period. Yet prior to the latest earnings, the analysts had anticipated revenues of UK£680.9m and earnings per share (EPS) of UK£0.78 in 2023. So it’s pretty clear that while sentiment around revenues has declined following the latest results, the analysts are now more bullish on the company’s earnings power.
The consensus has made no major changes to the price target of UK£21.59, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. 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 Intermediate Capital Group, with the most bullish analyst valuing it at UK£29.29 and the most bearish at UK£13.20 per share. 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 Intermediate Capital Group’s past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 18% annualized revenue decline to the end of 2023. That is a notable change from the historical growth of 18% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 6.6% per year. It’s pretty clear that Intermediate Capital Group’s revenues are expected to perform substantially worse than the wider industry.
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 toward Intermediate Capital Group following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Still, earnings per share are more important to value creation for shareholders. The consensus price target held steady at UK£21.59, with the latest estimates not enough to have an impact on their price targets.
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 Intermediate Capital Group analysts – going out to 2025, and you can see them free on our platform here.
That said, it’s still necessary to consider the ever-present specter of investment risk. We’ve identified 2 warning signs with Intermediate Capital Group (at least 1 which is a bit unpleasant), 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.