Investors in China Mobile Limited (HKG:941) had a good week, as its shares rose 9.5% to close at HK$56.60 following the release of its annual results. It was a credible result overall, with revenues of CN¥746b and statutory earnings per share of CN¥5.18 both in line with analyst estimates, showing that China Mobile is executing in line with expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following last week's earnings report, China Mobile's 21 analysts are forecasting 2020 revenues to be CN¥756.9b, approximately in line with the last 12 months. Statutory per-share earnings are expected to be CN¥5.25, roughly flat on the last 12 months. Before this earnings report, the analysts had been forecasting revenues of CN¥759.9b and earnings per share (EPS) of CN¥5.27 in 2020. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The analysts reconfirmed their price target of CN¥66.98, showing that the business is executing well and in line with expectations. 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. Currently, the most bullish analyst values China Mobile at CN¥82.77 per share, while the most bearish prices it at CN¥46.68. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await China Mobile shareholders.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that China Mobile's revenue growth will slow down substantially, with revenues next year expected to grow 1.5%, compared to a historical growth rate of 2.7% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 3.1% next year. Factoring in the forecast slowdown in growth, it seems obvious that China Mobile is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that China Mobile's revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that 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 China Mobile going out to 2024, and you can see them free on our platform here..
You should always think about risks though. Case in point, we've spotted 1 warning sign for China Mobile you should be aware of.
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