Continental Aktiengesellschaft (ETR:CON) shares fell 4.7% to €124 in the week since its latest third-quarter results. The result was not great – while revenues of €11b were in line with expectations,Continental lost €9.93 a share in the process. 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 forecasts to see whether analysts have changed their earnings models, following these results.
Following the latest results, Continental’s 23 analysts are now forecasting revenues of €46b in 2020. This would be an okay 2.5% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Continental forecast to report a profit of €11.55 per share. In the lead-up to this report, analysts had been modelling revenues of €46b and earnings per share (EPS) of €11.74 in 2020. The consensus analysts don’t seem to have seen anything in these results that would have changed their view on the business, given there’s been no major change to their estimates.
Analysts reconfirmed their price target of €129, showing that the business is executing well and in line with expectations. 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. The most optimistic Continental analyst has a price target of €180 per share, while the most pessimistic values it at €83.20. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether analysts are more or less bullish relative to other companies in the market. We would highlight that Continental’s revenue growth is expected to slow, with forecast 2.5% increase next year well below the historical 5.3%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 3.7% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Continental to grow slower than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there’s been no major change in the business’ prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Continental’s revenues are expected to perform worse than the wider market. The consensus price target held steady at €129, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Continental going out to 2023, and you can see them free on our platform here..
It might also be worth considering whether Continental’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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