Investors in Bharti Airtel Limited (NSE:BHARTIARTL) had a good week, as its shares rose 6.5% to close at ₹393 following the release of its second-quarter results. It looks like the results were pretty good overall. While revenues of ₹211b were in line with analyst predictions, losses were much smaller than expected, with Bharti Airtel losing ₹44.92 per share. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
After the latest results, the 18 analysts covering Bharti Airtel are now predicting revenues of ₹847.1b in 2020. If met, this would reflect a credible 2.5% improvement in sales compared to the last 12 months. Losses are forecast to balloon 85% to ₹8.83 per share. Yet prior to the latest earnings, analysts had been forecasting revenues of ₹844.5b and losses of ₹9.29 per share in 2020. There was no real change to the revenue estimates, but analysts do seem more bullish on earnings, given the modest lift to earnings per share expectations following these results.
There's been no major changes to the consensus price target of ₹404, suggesting that reduced loss estimates are not enough to have a long-term positive impact on the stock's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Bharti Airtel at ₹530 per share, while the most bearish prices it at ₹280. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
In addition, we can look to Bharti Airtel's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. For example, we noticed that Bharti Airtel's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow at 2.5%, well above its historical decline of 3.5% a year over the past five years. Compare this against analyst estimates for the wider market, which suggest that (in aggregate) market revenues are expected to grow 2.9% next year. So it looks like Bharti Airtel is expected to grow at about the same rate as the wider market.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. The consensus price target held steady at ₹404, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Bharti Airtel analysts - going out to 2022, and you can see them free on our platform here.
You can also see whether Bharti Airtel is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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