Market forces rained on the parade of EMS-CHEMIE HOLDING AG (VTX:EMSN) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
After the downgrade, the consensus from EMS-CHEMIE HOLDING's six analysts is for revenues of CHF1.9b in 2020, which would reflect an uneasy 15% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to sink 15% to CHF19.18 in the same period. Prior to this update, the analysts had been forecasting revenues of CHF2.1b and earnings per share (EPS) of CHF22.30 in 2020. Indeed, we can see that the analysts are a lot more bearish about EMS-CHEMIE HOLDING's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
It'll come as no surprise then, to learn that the analysts have cut their price target 6.5% to CHF533. 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. Currently, the most bullish analyst values EMS-CHEMIE HOLDING at CHF610 per share, while the most bearish prices it at CHF440. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
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. We would highlight that sales are expected to reverse, with the forecast 15% revenue decline a notable change from historical growth of 4.2% 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 3.8% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - EMS-CHEMIE HOLDING is expected to lag 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 EMS-CHEMIE HOLDING's revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of EMS-CHEMIE HOLDING.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for EMS-CHEMIE HOLDING going out to 2022, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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