EDP - Energias de Portugal, S.A. Just Missed Earnings And Its Revenue Numbers Were Particularly Weak
The analysts might have been a bit too bullish on EDP - Energias de Portugal, S.A. (ELI:EDP), given that the company fell short of expectations when it released its quarterly results last week. Earnings missed the mark, with revenues of €3.5b coming up 25% short, and statutory earnings per share of €0.14 missing estimates by 20%. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on EDP - Energias de Portugal after the latest results.
View our latest analysis for EDP - Energias de Portugal
Taking into account the latest results, the current consensus from EDP - Energias de Portugal's 13 analysts is for revenues of €15.1b in 2020, which would reflect a satisfactory 7.1% increase on its sales over the past 12 months. Statutory earnings per share are predicted to leap 51% to €0.23. In the lead-up to this report, the analysts had been modelling revenues of €16.5b and earnings per share (EPS) of €0.23 in 2020. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.
The average price target was steady at €4.32 even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. 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. There are some variant perceptions on EDP - Energias de Portugal, with the most bullish analyst valuing it at €5.30 and the most bearish at €3.30 per share. 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 EDP - Energias de Portugal shareholders.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the EDP - Energias de Portugal's past performance and to peers in the same industry. For example, we noticed that EDP - Energias de Portugal's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 7.1%, well above its historical decline of 1.6% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 3.2% per year. So it looks like EDP - Energias de Portugal is expected to grow faster than its competitors, at least for a while.
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. They also downgraded their revenue estimates, although industry data suggests that EDP - Energias de Portugal's revenues are expected to grow faster than the wider industry. Still, earnings per share are more important to value creation for shareholders. 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.
With that in mind, we wouldn't be too quick to come to a conclusion on EDP - Energias de Portugal. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple EDP - Energias de Portugal analysts - going out to 2022, and you can see them free on our platform here.
Before you take the next step you should know about the 3 warning signs for EDP - Energias de Portugal (1 is significant!) that we have uncovered.
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