U.S. Markets closed

Banco Bilbao Vizcaya Argentaria, S.A. (BME:BBVA): Are Analysts Right About The Drop In Earnings?

Simply Wall St

The latest earnings update Banco Bilbao Vizcaya Argentaria, S.A. (BME:BBVA) released in December 2018 indicated that the company benefited from a sizeable tailwind, leading to a high double-digit earnings growth of 65%. Investors may find it useful to understand how market analysts view Banco Bilbao Vizcaya Argentaria’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

Check out our latest analysis for Banco Bilbao Vizcaya Argentaria

Market analysts’ prospects for the upcoming year seems pessimistic, with earnings falling by a double-digit -15%. Beyond this, earnings should continue to be below today’s level, with a decline of -12% in 2021, eventually reaching €4.7b in 2022.

BME:BBVA Past and Future Earnings, March 19th 2019

Even though it’s helpful to be aware of the growth each year relative to today’s value, it may be more insightful estimating the rate at which the company is rising or falling on average every year. The advantage of this method is that it ignores near term flucuations and accounts for the overarching direction of Banco Bilbao Vizcaya Argentaria’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is -3.0%. This means, we can expect Banco Bilbao Vizcaya Argentaria will chip away at a rate of -3.0% every year for the next couple of years.

Next Steps:

For Banco Bilbao Vizcaya Argentaria, I’ve put together three relevant factors you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is BBVA worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether BBVA is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of BBVA? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.