There's been a notable change in appetite for Swire Pacific Limited (HKG:19) shares in the week since its annual report, with the stock down 11% to HK$61.90. It looks like a pretty bad result, all things considered. Although revenues of HK$86b were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 45% to hit HK$6.00 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've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Following the recent earnings report, the consensus fromfive analysts covering Swire Pacific expects revenues of HK$83.1b in 2020, implying a small 2.9% decline in sales compared to the last 12 months. Statutory earnings per share are forecast to dive 39% to HK$3.63 in the same period. Before this earnings report, analysts had been forecasting revenues of HK$87.7b and earnings per share (EPS) of HK$6.04 in 2020. Analysts seem less optimistic after the recent results, reducing their sales forecasts and making a large cut to earnings per share forecasts.
It'll come as no surprise then, to learn that analysts have cut their price target 9.8% to HK$81.31. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Swire Pacific at HK$107 per share, while the most bearish prices it at HK$69.00. 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.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 2.9% a significant reduction from annual growth of 9.0% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 16% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Swire Pacific to grow slower 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 Swire Pacific. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Swire Pacific's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on Swire Pacific. 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 Swire Pacific going out to 2022, and you can see them free on our platform here..
It might also be worth considering whether Swire Pacific'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 email@example.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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