Last week, you might have seen that Federal Signal Corporation (NYSE:FSS) released its quarterly result to the market. The early response was not positive, with shares down 9.4% to US$28.68 in the past week. Federal Signal reported US$280m in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$0.41 beat expectations, being 9.3% higher than what the analysts expected. 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.
After the latest results, the six analysts covering Federal Signal are now predicting revenues of US$1.24b in 2021. If met, this would reflect a solid 8.1% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to grow 11% to US$1.83. Before this earnings report, the analysts had been forecasting revenues of US$1.26b and earnings per share (EPS) of US$1.84 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
With the analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 7.8% to US$36.67. It looks as though they previously had some doubts over whether the business would live up to their expectations. 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 Federal Signal analyst has a price target of US$40.00 per share, while the most pessimistic values it at US$31.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Federal Signal's revenue growth is expected to slow, with forecast 8.1% increase next year well below the historical 13%p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 7.4% next year. Factoring in the forecast slowdown in growth, it looks like Federal Signal is forecast to grow at about the same rate as the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Federal Signal analysts - going out to 2024, and you can see them free on our platform here.
You still need to take note of risks, for example - Federal Signal has 1 warning sign we think you should be aware of.
This article by Simply Wall St is general in nature. 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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