The latest analyst coverage could presage a bad day for JBS S.A. (BVMF:JBSS3), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
After the downgrade, the consensus from JBS' eleven analysts is for revenues of R$206b in 2020, which would reflect a small 4.7% decline in sales compared to the last year of performance. Losses are expected to turn into profits real soon, with the analysts forecasting R$1.73 in per-share earnings. Previously, the analysts had been modelling revenues of R$248b and earnings per share (EPS) of R$1.73 in 2020. Indeed we can see that the consensus opinion has undergone some fundamental changes following the recent consensus updates, with a substantial drop in revenues and some minor tweaks to earnings numbers.
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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. We would highlight that sales are expected to reverse, with the forecast 4.7% revenue decline a notable change from historical growth of 6.5% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.9% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - JBS is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of JBS going forwards.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple JBS analysts - going out to 2024, and you can see them free on our platform here.
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. 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. Thank you for reading.
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