There's been a notable change in appetite for Brembo S.p.A. (BIT:BRE) shares in the week since its annual report, with the stock down 11% to €7.28. It was an okay report, and revenues came in at €2.6b, approximately in line with analyst estimates leading up to the results announcement. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Following the recent earnings report, the consensus fromthree analysts covering Brembo expects revenues of €2.51b in 2020, implying a measurable 3.2% decline in sales compared to the last 12 months. Statutory earnings per share are expected to decline 13% to €0.61 in the same period. Before this earnings report, analysts had been forecasting revenues of €2.66b and earnings per share (EPS) of €0.72 in 2020. Analysts seem less optimistic after the recent results, reducing their sales forecasts and making a real cut to earnings per share forecasts.
It'll come as no surprise then, to learn that analysts have cut their price target 7.7% to €9.62. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Brembo analyst has a price target of €10.50 per share, while the most pessimistic values it at €9.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. We would highlight that sales are expected to reverse, with the forecast 3.2% revenue decline a notable change from historical growth of 7.4% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 2.5% next year. It's pretty clear that Brembo's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Brembo's future valuation.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Brembo going out to 2022, and you can see them free on our platform here..
It might also be worth considering whether Brembo's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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