Time To Worry? Analysts Are Downgrading Their Aeris Indústria e Comércio de Equipamentos para Geração de Energia S.A. (BVMF:AERI3) Outlook

One thing we could say about the analysts on Aeris Indústria e Comércio de Equipamentos para Geração de Energia S.A. (BVMF:AERI3) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the downgrade, the latest consensus from Aeris Indústria e Comércio de Equipamentos para Geração de Energia's four analysts is for revenues of R$2.7b in 2022, which would reflect a notable 12% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to surge 33,233% to R$0.02. Before this latest update, the analysts had been forecasting revenues of R$3.7b and earnings per share (EPS) of R$0.19 in 2022. It looks like analyst sentiment has declined substantially, with a pretty serious reduction to revenue estimates and a large cut to earnings per share numbers as well.

Check out our latest analysis for Aeris Indústria e Comércio de Equipamentos para Geração de Energia

It'll come as no surprise then, to learn that the analysts have cut their price target 19% to R$6.10. 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. There are some variant perceptions on Aeris Indústria e Comércio de Equipamentos para Geração de Energia, with the most bullish analyst valuing it at R$10.00 and the most bearish at R$3.50 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. For example, we noticed that Aeris Indústria e Comércio de Equipamentos para Geração de Energia's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 26% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 12% a year over the past year. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 18% annually. Not only are Aeris Indústria e Comércio de Equipamentos para Geração de Energia's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Aeris Indústria e Comércio de Equipamentos para Geração de Energia.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Aeris Indústria e Comércio de Equipamentos para Geração de Energia's business, like its declining profit margins. For more information, you can click here to discover this and the 2 other flags we've identified.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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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.