Earnings Miss: Dexco S.A. Missed EPS And Analysts Are Revising Their Forecasts

Last week saw the newest quarterly earnings release from Dexco S.A. (BVMF:DXCO3), an important milestone in the company's journey to build a stronger business. It was a pretty negative result overall, with revenues of R$1.9b missing analyst predictions by 2.6%. Worse, the business reported a statutory loss of R$0.049 per share, a substantial decline on analyst expectations of a profit. 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Dexco

Taking into account the latest results, Dexco's eight analysts currently expect revenues in 2024 to be R$7.70b, approximately in line with the last 12 months. Statutory earnings per share are expected to plunge 66% to R$0.25 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of R$7.84b and earnings per share (EPS) of R$0.34 in 2024. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.

It might be a surprise to learn that the consensus price target was broadly unchanged at R$9.88, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Dexco, with the most bullish analyst valuing it at R$11.00 and the most bearish at R$8.50 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Dexco is an easy business to forecast or the the analysts are all using similar assumptions.

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. We would highlight that Dexco's revenue growth is expected to slow, with the forecast 1.7% annualised growth rate until the end of 2024 being well below the historical 11% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 6.5% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Dexco.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Dexco. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Dexco's revenue is expected to 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.

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 estimates - from multiple Dexco analysts - going out to 2026, and you can see them free on our platform here.

You still need to take note of risks, for example - Dexco has 4 warning signs (and 1 which makes us a bit uncomfortable) we think 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.