Earnings Update: Select Harvests Limited Beat Earnings And Now Analysts Have New Forecasts For This Year

A week ago, Select Harvests Limited (ASX:SHV) came out with a strong set of annual numbers that could potentially lead to a re-rate of the stock. Results were good overall, with revenues beating analyst predictions by 7.9% to hit AU$292m. Statutory earnings per share (EPS) came in at AU$0.26, some 8.0% above whatthe analysts had expected. 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Select Harvests

Following the recent earnings report, the consensus from five analysts covering Select Harvests is for revenues of AU$271.2m in 2021, implying a noticeable 7.0% decline in sales compared to the last 12 months. Statutory earnings per share are forecast to dive 58% to AU$0.22 in the same period. In the lead-up to this report, the analysts had been modelling revenues of AU$299.7m and earnings per share (EPS) of AU$0.31 in 2021. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a large cut to earnings per share estimates.

The analysts made no major changes to their price target of AU$7.39, suggesting the downgrades are not expected to have a long-term impact on Select Harvests' valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Select Harvests analyst has a price target of AU$9.80 per share, while the most pessimistic values it at AU$5.76. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 7.0%, a significant reduction from annual growth of 2.6% over the last year. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.2% annually for the foreseeable future. It's pretty clear that Select Harvests' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Select Harvests. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target held steady at AU$7.39, with the latest estimates not enough to have an impact on their price targets.

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. At Simply Wall St, we have a full range of analyst estimates for Select Harvests going out to 2024, and you can see them free on our platform here..

It is also worth noting that we have found 3 warning signs for Select Harvests that you need to take into consideration.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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