Results: Rede D'Or São Luiz S.A. Beat Earnings Expectations And Analysts Now Have New Forecasts

Investors in Rede D'Or São Luiz S.A. (BVMF:RDOR3) had a good week, as its shares rose 3.2% to close at R$35.80 following the release of its second-quarter results. It looks like a credible result overall - although revenues of R$5.8b were what the analysts expected, Rede D'Or São Luiz surprised by delivering a (statutory) profit of R$0.17 per share, an impressive 49% above what was forecast. 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 Rede D'Or São Luiz after the latest results.

View our latest analysis for Rede D'Or São Luiz

Taking into account the latest results, the consensus forecast from Rede D'Or São Luiz's 13 analysts is for revenues of R$23.1b in 2022, which would reflect a credible 6.9% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to fall 13% to R$0.58 in the same period. Before this earnings report, the analysts had been forecasting revenues of R$23.6b and earnings per share (EPS) of R$0.67 in 2022. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a real cut to earnings per share estimates.

Despite the cuts to forecast earnings, there was no real change to the R$49.27 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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 Rede D'Or São Luiz analyst has a price target of R$81.00 per share, while the most pessimistic values it at R$37.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Rede D'Or São Luiz's revenue growth is expected to slow, with the forecast 14% annualised growth rate until the end of 2022 being well below the historical 18% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 17% per year. Factoring in the forecast slowdown in growth, it seems obvious that Rede D'Or São Luiz is also expected to grow slower than other industry participants.

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. 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 R$49.27, 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. We have forecasts for Rede D'Or São Luiz going out to 2024, and you can see them free on our platform here.

It is also worth noting that we have found 2 warning signs for Rede D'Or São Luiz that you need to take into consideration.

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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.