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Results: AB Volvo (publ) Beat Earnings Expectations And Analysts Now Have New Forecasts

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·4 min read
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A week ago, AB Volvo (publ) (STO:VOLV B) came out with a strong set of first-quarter numbers that could potentially lead to a re-rate of the stock. The company beat both earnings and revenue forecasts, with revenue of kr91b, some 5.9% above estimates, and statutory earnings per share (EPS) coming in at kr2.30, 47% ahead of expectations. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for AB Volvo

OM:VOLV B Past and Future Earnings April 27th 2020
OM:VOLV B Past and Future Earnings April 27th 2020

Taking into account the latest results, the current consensus, from the 15 analysts covering AB Volvo, is for revenues of kr327.1b in 2020, which would reflect a painful 21% reduction in AB Volvo's sales over the past 12 months. Statutory earnings per share are expected to plunge 65% to kr5.08 in the same period. Before this earnings report, the analysts had been forecasting revenues of kr345.5b and earnings per share (EPS) of kr7.41 in 2020. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a pretty serious reduction to earnings per share numbers.

The analysts made no major changes to their price target of kr155, suggesting the downgrades are not expected to have a long-term impact on AB Volvo'svaluation. 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 AB Volvo analyst has a price target of kr200 per share, while the most pessimistic values it at kr116. 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with the forecast 21% revenue decline a notable change from historical growth of 8.6% 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 4.6% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - AB Volvo is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at kr155, with the latest estimates not enough to have an impact on their price targets.

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 Simply Wall St, we have a full range of analyst estimates for AB Volvo going out to 2024, and you can see them free on our platform here..

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with AB Volvo , and understanding these should be part of your investment process.

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.

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.