Earnings Update: Here's Why Analysts Just Lifted Their ElringKlinger AG (ETR:ZIL2) Price Target To €11.44

ElringKlinger AG (ETR:ZIL2) shareholders are probably feeling a little disappointed, since its shares fell 3.7% to €12.61 in the week after its latest yearly results. It was a pretty bad result overall; while revenues were in line with expectations at €1.5b, statutory losses exploded to €0.64 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on ElringKlinger after the latest results.

Check out our latest analysis for ElringKlinger

Taking into account the latest results, the consensus forecast from ElringKlinger's eight analysts is for revenues of €1.63b in 2021, which would reflect a notable 10% improvement in sales compared to the last 12 months. ElringKlinger is also expected to turn profitable, with statutory earnings of €0.54 per share. Before this earnings report, the analysts had been forecasting revenues of €1.60b and earnings per share (EPS) of €0.53 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 5.8% to €11.44. 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. The most optimistic ElringKlinger analyst has a price target of €30.00 per share, while the most pessimistic values it at €4.00. 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 analysts think this business will perform. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

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. The analysts are definitely expecting ElringKlinger's growth to accelerate, with the forecast 10% annualised growth to the end of 2021 ranking favourably alongside historical growth of 0.7% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.8% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect ElringKlinger to grow faster than the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards ElringKlinger following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on ElringKlinger. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for ElringKlinger going out to 2025, and you can see them free on our platform here..

And what about risks? Every company has them, and we've spotted 2 warning signs for ElringKlinger (of which 1 is a bit unpleasant!) you should know about.

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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.
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