The yearly results for China Resources Beer (Holdings) Company Limited (HKG:291) were released last week, making it a good time to revisit its performance. Statutory earnings per share fell badly short of expectations, coming in at CN¥0.39, some 29% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at CN¥33b. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus, from the 22 analysts covering China Resources Beer (Holdings), is for revenues of CN¥31.7b in 2020, which would reflect a discernible 4.4% reduction in China Resources Beer (Holdings)'s sales over the past 12 months. Per-share earnings are expected to soar 87% to CN¥0.76. Before this earnings report, the analysts had been forecasting revenues of CN¥36.0b and earnings per share (EPS) of CN¥0.92 in 2020. Indeed, we can see that the analysts are a lot more bearish about China Resources Beer (Holdings)'s prospects following the latest results, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
The consensus price target fell 5.8% to HK$40.71, with the weaker earnings outlook clearly leading valuation estimates. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic China Resources Beer (Holdings) analyst has a price target of HK$49.52 per share, while the most pessimistic values it at HK$23.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 4.4% revenue decline a notable change from historical growth of 4.1% 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 11% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - China Resources Beer (Holdings) is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple China Resources Beer (Holdings) analysts - going out to 2022, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 2 warning signs for China Resources Beer (Holdings) that you should be aware of.
If you spot an error that warrants correction, please contact the editor at email@example.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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