Shareholders in Samsonite International S.A. (HKG:1910) had a terrible week, as shares crashed 21% to HK$6.10 in the week since its latest annual results. It looks like a pretty bad result, all things considered. Although revenues of US$3.6b were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 28% to hit US$0.093 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
After the latest results, the consensus from Samsonite International's seven analysts is for revenues of US$2.76b in 2020, which would reflect a stressful 24% decline in sales compared to the last year of performance. Statutory earnings per share are expected to dive 82% to US$0.017 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$3.67b and earnings per share (EPS) of US$0.15 in 2020. Indeed, we can see that the analysts are a lot more bearish about Samsonite International's prospects following the latest results, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.
The consensus price target fell 21% to US$1.90, with the weaker earnings outlook clearly leading valuation estimates. 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$2.73 and the most bearish at US$0.77 per share. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Samsonite International's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with the forecast 24% revenue decline a notable change from historical growth of 12% 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 14% 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 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. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
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. We have forecasts for Samsonite International going out to 2022, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 5 warning signs for Samsonite International that you should be aware of.
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