Shareholders of Hapag-Lloyd Aktiengesellschaft (ETR:HLAG) will be pleased this week, given that the stock price is up 15% to €77.80 following its latest third-quarter results. Earnings per share fell badly short of expectations, coming in at €0.21, some 30% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at €3.2b. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent forecasts to see whether analysts have changed their earnings models, following these results.
After the latest results, the eleven analysts covering Hapag-Lloyd are now predicting revenues of €13.3b in 2020. If met, this would reflect a credible 6.0% improvement in sales compared to the last 12 months. Earnings per share are expected to rise 8.8% to €1.98. In the lead-up to this report, analysts had been modelling revenues of €13.3b and earnings per share (EPS) of €1.89 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target was unchanged at €38.46, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Hapag-Lloyd at €67.00 per share, while the most bearish prices it at €25.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. With this in mind, we wouldn't assign too much meaning to the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Hapag-Lloyd's past performance and to peers in the same market. We would highlight that Hapag-Lloyd's revenue growth is expected to slow, with forecast 6.0% increase next year well below the historical 12%p.a. growth over the last five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 3.9% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkHapag-Lloyd will grow faster than the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Hapag-Lloyd's earnings potential next year. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Hapag-Lloyd's revenues are expected to grow faster than the wider market. 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.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Hapag-Lloyd going out to 2023, and you can see them free on our platform here.
You can also see whether Hapag-Lloyd is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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