TPG Telecom Limited Just Missed EPS By 34%: Here's What Analysts Think Will Happen Next

TPG Telecom Limited (ASX:TPG) shareholders are probably feeling a little disappointed, since its shares fell 4.0% to AU$5.56 in the week after its latest annual results. It looks like a pretty bad result, all things considered. Although revenues of AU$5.3b were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 34% to hit AU$0.06 per share. Following the result, the 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on TPG Telecom after the latest results.

View our latest analysis for TPG Telecom

Following last week's earnings report, TPG Telecom's ten analysts are forecasting 2022 revenues to be AU$5.40b, approximately in line with the last 12 months. Statutory earnings per share are predicted to jump 76% to AU$0.10. Before this earnings report, the analysts had been forecasting revenues of AU$5.47b and earnings per share (EPS) of AU$0.13 in 2022. So there's definitely been a decline in sentiment after the latest results, noting the real cut to new EPS forecasts.

The consensus price target held steady at AU$7.05, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on TPG Telecom, with the most bullish analyst valuing it at AU$8.40 and the most bearish at AU$5.80 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await TPG Telecom shareholders.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that TPG Telecom's revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 1.4% growth on an annualised basis. This is compared to a historical growth rate of 9.4% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.0% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than TPG Telecom.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for TPG Telecom going out to 2024, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 3 warning signs for TPG Telecom you should know about.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.