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Mondi plc Just Reported Full-Year Earnings: Have Analysts Changed Their Mind On The Stock?

Simply Wall St

Mondi plc (LON:MNDI) shares fell 9.0% to UK£15.62 in the week since its latest annual results. Results look mixed - while revenue fell marginally short of analyst estimates at €7.3b, statutory earnings were in line with expectations, at €1.68 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts 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 analysts' latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Mondi

LSE:MNDI Past and Future Earnings, March 1st 2020

Taking into account the latest results, Mondi's 13 analysts currently expect revenues in 2020 to be €7.22b, approximately in line with the last 12 months. Statutory earnings per share are forecast to fall 14% to €1.45 in the same period. In the lead-up to this report, analysts had been modelling revenues of €7.29b and earnings per share (EPS) of €1.51 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share forecasts for next year.

It might be a surprise to learn that the consensus price target was broadly unchanged at €22.37, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. Currently, the most bullish analyst values Mondi at €27.10 per share, while the most bearish prices it at €19.87. 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.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with the forecast 0.7% revenue decline a notable change from historical growth of 3.0% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 0.7% annually for the foreseeable future. It's pretty clear that Mondi's revenues are expected to perform substantially worse than the wider market.

The Bottom Line

The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Mondi. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at €22.37, 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 Mondi. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Mondi going out to 2022, and you can see them free on our platform here..

It might also be worth considering whether Mondi's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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