Constellation Software Inc. Just Missed Earnings - But Analysts Have Updated Their Models

It's been a good week for Constellation Software Inc. (TSE:CSU) shareholders, because the company has just released its latest quarterly results, and the shares gained 2.3% to CA$3,527. Statutory earnings per share fell badly short of expectations, coming in at US$10.01, some 30% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at US$3.5b. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

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Taking into account the latest results, the current consensus from Constellation Software's eleven analysts is for revenues of US$16.1b in 2027. This would reflect a huge 22% increase on its revenue over the past 12 months. Per-share earnings are expected to bounce 42% to US$64.63. Before this earnings report, the analysts had been forecasting revenues of US$16.1b and earnings per share (EPS) of US$61.27 in 2027. So the consensus seems to have become somewhat more optimistic on Constellation Software's earnings potential following these results.

See our latest analysis for Constellation Software

The consensus price target was unchanged at CA$4,019, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. 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. Currently, the most bullish analyst values Constellation Software at CA$5,581 per share, while the most bearish prices it at CA$3,349. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

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. The period to the end of 2027 brings more of the same, according to the analysts, with revenue forecast to display 17% growth on an annualised basis. That is in line with its 19% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 14% per year. So although Constellation Software is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.

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 Constellation Software following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting that it's tracking in line with expectations. Additionally, our data suggests that revenue is expected to grow faster than the wider industry. The consensus price target held steady at CA$4,019, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Constellation Software. Long-term earnings power is much more important than next year's profits. We have forecasts for Constellation Software going out to 2028, and you can see them free on our platform here.

You still need to take note of risks, for example - Constellation Software has 2 warning signs we think you should be aware of.

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