Covestro AG Just Missed Earnings; Here's What Analysts Are Forecasting Now

Covestro AG (ETR:1COV) last week reported its latest first-quarter results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Revenues fell 2.6% short of expectations, at €3.5b. Earnings correspondingly dipped, with Covestro reporting a statutory loss of €0.19 per share, whereas the analysts had previously modelled a profit in this period. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for Covestro

Taking into account the latest results, the consensus forecast from Covestro's 13 analysts is for revenues of €14.7b in 2024. This reflects a modest 3.9% improvement in revenue compared to the last 12 months. Covestro is also expected to turn profitable, with statutory earnings of €0.62 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of €14.8b and earnings per share (EPS) of €0.92 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 €52.93, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Covestro, with the most bullish analyst valuing it at €61.00 and the most bearish at €38.00 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Covestro's past performance and to peers in the same industry. It's pretty clear that there is an expectation that Covestro's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 5.2% growth on an annualised basis. This is compared to a historical growth rate of 6.8% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.2% per year. Even after the forecast slowdown in growth, it seems obvious that Covestro is also expected to grow faster than the wider industry.

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. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster 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.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Covestro going out to 2026, and you can see them free on our platform here.

It might also be worth considering whether Covestro's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

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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.