Last week, you might have seen that Samsonite International S.A. (HKG:1910) released its first-quarter result to the market. The early response was not positive, with shares down 6.3% to HK$6.26 in the past week. Results overall were not great, with earnings of US$0.093 per share falling drastically short of analyst expectations. Meanwhile revenues hit US$601m and were slightly better than forecasts. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Samsonite International after the latest results.
Following the recent earnings report, the consensus from nine analysts covering Samsonite International is for revenues of US$2.21b in 2020, implying a concerning 35% decline in sales compared to the last 12 months. Losses are forecast to balloon 28% to US$0.61 per share. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$2.48b and losses of US$0.27 per share in 2020. There's been a definite change in sentiment in this update, with the analysts administering a notable cut to next year's revenue estimates, while at the same time increasing their loss per share forecasts.
There was no major change to the consensus price target of US$1.48, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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. There are some variant perceptions on Samsonite International, with the most bullish analyst valuing it at US$2.57 and the most bearish at US$0.77 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
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 35% revenue decline a notable change from historical growth of 11% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 12% next year. It's pretty clear that Samsonite International's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Samsonite International. 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 US$1.48, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Samsonite International. 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 Samsonite International going out to 2022, and you can see them free on our platform here..
Even so, be aware that Samsonite International is showing 2 warning signs in our investment analysis , and 1 of those is significant...
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