Holmen AB (publ) (STO:HOLM B) came out with its quarterly results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. It was a pretty mixed result, with revenues beating expectations to hit kr4.5b. Statutory earnings fell 6.3% short of analyst forecasts, reaching kr3.00 per share. 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.
Taking into account the latest results, the current consensus, from the five analysts covering Holmen, is for revenues of kr16.0b in 2020, which would reflect a considerable 9.0% reduction in Holmen's sales over the past 12 months. Statutory earnings per share are expected to plummet 80% to kr10.54 in the same period. Before this earnings report, the analysts had been forecasting revenues of kr16.0b and earnings per share (EPS) of kr10.41 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.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at kr292. 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 Holmen at kr336 per share, while the most bearish prices it at kr250. This is a very narrow spread of estimates, implying either that Holmen is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Holmen's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 9.0% revenue decline a notable change from historical growth of 1.1% 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 2.3% annually for the foreseeable future. It's pretty clear that Holmen's revenues are expected to perform substantially worse than the wider industry.
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 Holmen'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.
With that in mind, we wouldn't be too quick to come to a conclusion on Holmen. Long-term earnings power is much more important than next year's profits. We have forecasts for Holmen going out to 2023, and you can see them free on our platform here.
It is also worth noting that we have found 2 warning signs for Holmen (1 is a bit unpleasant!) that you need to take into consideration.
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