The most recent earnings release Deutsche Lufthansa AG's (FRA:LHA) announced in December 2018 indicated that the company endured a minor headwind with earnings deteriorating from €2.3b to €2.2b, a change of -7.6%. Today I want to provide a brief commentary on how market analysts predict Deutsche Lufthansa's earnings growth outlook over the next few years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Market analysts' consensus outlook for the upcoming year seems pessimistic, with earnings decreasing by -7.6%. But in the following year, there is a complete contrast in performance, with reaching double digit 2.0% compared to today’s level and continues to increase to €2.4b in 2022.
While it’s useful to understand the growth year by year relative to today’s level, it may be more insightful estimating the rate at which the business is growing every year, on average. The benefit of this method is that it ignores near term flucuations and accounts for the overarching direction of Deutsche Lufthansa's earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I've appended 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 3.8%. This means that, we can presume Deutsche Lufthansa will grow its earnings by 3.8% every year for the next few years.
For Deutsche Lufthansa, I've put together three important factors you should further research:
- 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.
- Valuation: What is LHA 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 LHA is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of LHA? 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 firstname.lastname@example.org. 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.