thyssenkrupp AG (ETR:TKA) investors will be delighted, with the company turning in some strong numbers with its latest results. Revenues and losses per share were both better than expected, with revenues of €42b leading estimates by 2.1%. Losses were smaller than analysts expected, coming in at €0.49 per share. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. We thought readers would find it interesting to see analysts’ latest post-earnings forecasts for next year.
Following last week’s earnings report, thyssenkrupp’s eleven analysts are forecasting 2020 revenues to be €42.2b, approximately in line with the last 12 months. thyssenkrupp is also expected to turn profitable, with earnings of €0.43 per share. In the lead-up to this report, analysts had been modelling revenues of €42.3b and earnings per share (EPS) of €0.66 in 2020. So there’s definitely been a decline in analyst sentiment after the latest results, noting the large cut to new EPS forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at €13.42, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. The consensus price target just an average of individual analyst targets, so – considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values thyssenkrupp at €16.70 per share, while the most bearish prices it at €9.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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. It’s also worth noting that the years of declining sales look to have come to an end, with the forecast for flat revenues next year. Historically, thyssenkrupp’s sales have shrunk approximately 3.2% annually over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 1.0% per year. Although thyssenkrupp’s revenues are expected to improve, it seems that analysts are still expecting it to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that thyssenkrupp’s revenues are expected to perform worse than the wider market. The consensus price target held steady at €13.42, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for thyssenkrupp going out to 2024, and you can see them free on our platform here..
You can also see whether thyssenkrupp is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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