Analysts Are Much More Bearish On Neste Oyj (HEL:NESTE) Than They Used To Be
Today is shaping up negative for Neste Oyj (HEL:NESTE) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
After the downgrade, the consensus from Neste Oyj's 15 analysts is for revenues of €11b in 2020, which would reflect a concerning 26% decline in sales compared to the last year of performance. Statutory earnings per share are supposed to tumble 37% to €1.46 in the same period. Prior to this update, the analysts had been forecasting revenues of €12b and earnings per share (EPS) of €1.68 in 2020. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a real cut to earnings per share numbers as well.
View our latest analysis for Neste Oyj
Despite the cuts to forecast earnings, there was no real change to the €35.29 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. There are some variant perceptions on Neste Oyj, with the most bullish analyst valuing it at €42.00 and the most bearish at €28.30 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with the forecast 26% revenue decline a notable change from historical growth of 7.2% 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 1.8% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Neste Oyj 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. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales 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 Neste Oyj after the downgrade.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Neste Oyj analysts - going out to 2024, 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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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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