Investors in Raisio plc (HEL:RAIVV) had a good week, as its shares rose 4.9% to close at €3.55 following the release of its first-quarter results. Results overall were not great, with earnings of €0.01 per share falling drastically short of analyst expectations. Meanwhile revenues hit €55m and were slightly better than forecasts. Following the result, the 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, Raisio's two analysts currently expect revenues in 2020 to be €245.5m, approximately in line with the last 12 months. Statutory earnings per share are predicted to expand 12% to €0.15. In the lead-up to this report, the analysts had been modelling revenues of €239.6m and earnings per share (EPS) of €0.15 in 2020. Overall it looks as though the analysts were a bit mixed on the latest results. Although there was a to revenue, the consensus also made a minor downgrade to to its earnings per share forecasts.
The analysts also upgraded Raisio's price target 8.6% to €3.80, implying that the higher sales are expected to generate enough value to offset the forecast decline in earnings.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. From these estimates it looks as though the analysts expect the years of declining sales to come to an end, given the flat revenue forecast for next year. That would be a definite improvement, given that the past five years have seen sales shrink five years annually. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 2.2% next year. Although Raisio's revenues are expected to improve, it seems that it is still expected to grow slower than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Raisio. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At least one analyst has provided forecasts out to 2024, which can be seen for free on our platform here.
However, before you get too enthused, we've discovered 3 warning signs for Raisio that you should be aware of.
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