Need To Know: Analysts Just Made A Substantial Cut To Their Amadeus IT Group, S.A. (BME:AMS) Estimates
One thing we could say about the analysts on Amadeus IT Group, S.A. (BME:AMS) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.
Following the downgrade, the consensus from 22 analysts covering Amadeus IT Group is for revenues of €3.2b in 2020, implying a concerning 38% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to plunge 87% to €0.28 in the same period. Previously, the analysts had been modelling revenues of €3.8b and earnings per share (EPS) of €0.87 in 2020. Indeed, we can see that the analysts are a lot more bearish about Amadeus IT Group's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
Check out our latest analysis for Amadeus IT Group
Analysts made no major changes to their price target of €50.64, suggesting the downgrades are not expected to have a long-term impact on Amadeus IT Group'svaluation. 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 Amadeus IT Group, with the most bullish analyst valuing it at €82.00 and the most bearish at €29.60 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Amadeus IT Group's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 38%, a significant reduction from annual growth of 7.9% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.4% annually for the foreseeable future. It's pretty clear that Amadeus IT Group's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Amadeus IT Group's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Amadeus IT Group after the downgrade.
Worse, Amadeus IT Group is labouring under a substantial debt burden, which - if today's forecasts prove accurate - the forecast downgrade could potentially exacerbate. You can learn more about our debt analysis for free on our platform here.
You can also see our analysis of Amadeus IT Group's Board and CEO remuneration and experience, and whether company insiders have been buying stock.
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