The latest analyst coverage could presage a bad day for Haier Electronics Group Co., Ltd. (HKG:1169), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. The stock price has risen 8.0% to CN¥20.65 over the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.
Following the downgrade, the consensus from twelve analysts covering Haier Electronics Group is for revenues of CN¥73b in 2020, implying a discernible 3.7% decline in sales compared to the last 12 months. Statutory earnings per share are forecast to be CN¥1.42, approximately in line with the last 12 months. Previously, the analysts had been modelling revenues of CN¥83b and earnings per share (EPS) of CN¥1.64 in 2020. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a considerable drop in earnings per share numbers as well.
Analysts made no major changes to their price target of HK$25.50, suggesting the downgrades are not expected to have a long-term impact on Haier Electronics Group'svaluation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Haier Electronics Group analyst has a price target of HK$28.56 per share, while the most pessimistic values it at HK$23.40. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 3.7%, a significant reduction from annual growth of 7.1% 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 8.5% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Haier Electronics Group is expected to lag the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Haier Electronics Group. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Haier Electronics Group.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Haier Electronics Group analysts - going out to 2024, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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