Earnings Miss: Shandong Hualu-Hengsheng Chemical Co., Ltd. Missed EPS By 17% And Analysts Are Revising Their Forecasts

Shandong Hualu-Hengsheng Chemical Co., Ltd. (SHSE:600426) just released its latest full-year report and things are not looking great. It wasn't a great result overall - while revenue fell marginally short of analyst estimates at CN¥27b, statutory earnings missed forecasts by 17%, coming in at just CN¥1.69 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 Shandong Hualu-Hengsheng Chemical after the latest results.

View our latest analysis for Shandong Hualu-Hengsheng Chemical

After the latest results, the twelve analysts covering Shandong Hualu-Hengsheng Chemical are now predicting revenues of CN¥33.7b in 2024. If met, this would reflect a huge 24% improvement in revenue compared to the last 12 months. Per-share earnings are expected to bounce 30% to CN¥2.19. Before this earnings report, the analysts had been forecasting revenues of CN¥37.9b and earnings per share (EPS) of CN¥2.88 in 2024. Indeed, we can see that the analysts are a lot more bearish about Shandong Hualu-Hengsheng Chemical's prospects following the latest results, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

It'll come as no surprise then, to learn that the analysts have cut their price target 9.7% to CN¥36.13. 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 Shandong Hualu-Hengsheng Chemical, with the most bullish analyst valuing it at CN¥39.00 and the most bearish at CN¥34.08 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Shandong Hualu-Hengsheng Chemical 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. It's clear from the latest estimates that Shandong Hualu-Hengsheng Chemical's rate of growth is expected to accelerate meaningfully, with the forecast 24% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 19% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 17% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Shandong Hualu-Hengsheng Chemical to grow faster than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Shandong Hualu-Hengsheng Chemical. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

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 Shandong Hualu-Hengsheng Chemical analysts - going out to 2026, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Shandong Hualu-Hengsheng Chemical (1 makes us a bit uncomfortable!) that you need to be mindful of.

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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.