Knorr-Bremse Aktiengesellschaft (ETR:KBX) missed earnings with its latest quarterly results, disappointing overly-optimistic analysts. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at €1.7b, earnings missed forecasts by an incredible 36%, coming in at just €0.56 per share. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest forecasts to see what analysts are expecting for next year.
Taking into account the latest results, the current consensus, from the 13 analysts covering Knorr-Bremse, is for revenues of €6.76b in 2020, which would reflect a measurable 3.3% reduction in Knorr-Bremse's sales over the past 12 months. Earnings per share are expected to expand 14% to €3.98. Before this earnings report, analysts had been forecasting revenues of €6.89b and earnings per share (EPS) of €4.10 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a minor downgrade to their earnings per share forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at €81.46, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Knorr-Bremse analyst has a price target of €95.00 per share, while the most pessimistic values it at €65.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
In addition, we can look to Knorr-Bremse's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. These estimates imply that sales are expected to slow, with a forecast revenue decline of 3.3% a significant reduction from annual growth of 6.0% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 3.8% next year. It's pretty clear that Knorr-Bremse's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Knorr-Bremse's revenues are expected to perform worse than the wider market. The consensus price target held steady at €81.46, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Knorr-Bremse. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Knorr-Bremse analysts - going out to 2023, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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.
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. Thank you for reading.