Last week saw the newest quarterly earnings release from Svenska Handelsbanken AB (publ) (STO:SHB A), an important milestone in the company’s journey to build a stronger business. Revenues of kr11b fell slightly short of expectations, but earnings were a definite bright spot, with statutory per-share profits of kr2.00 an impressive 29% ahead of estimates. 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 Svenska Handelsbanken after the latest results.
Taking into account the latest results, Svenska Handelsbanken’s 13 analysts currently expect revenues in 2020 to be kr44.0b, approximately in line with the last 12 months. Statutory earnings per share are expected to dip 6.2% to kr7.53 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of kr44.2b and earnings per share (EPS) of kr7.35 in 2020. So the consensus seems to have become somewhat more optimistic on Svenska Handelsbanken’s earnings potential following these results.
There’s been no major changes to the consensus price target of kr96.44, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock’s valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Svenska Handelsbanken at kr117 per share, while the most bearish prices it at kr78.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Svenska Handelsbanken’s past performance and to peers in the same industry. It’s pretty clear that there is an expectation that Svenska Handelsbanken’s revenue growth will slow down substantially, with revenues next year expected to grow 1.4%, compared to a historical growth rate of 3.2% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, 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 Svenska Handelsbanken is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Svenska Handelsbanken following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
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 Svenska Handelsbanken going out to 2023, and you can see them free on our platform here.
You can also view our analysis of Svenska Handelsbanken’s balance sheet, and whether we think Svenska Handelsbanken is carrying too much debt, for free on our platform here.
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