NKT A/S (CPH:NKT) defied analyst predictions to release its quarterly results, which were ahead of market expectations. Revenues and losses per share were both better than expected, with revenues of €393m leading estimates by 8.7%. Statutory losses were smaller than the analystsexpected, coming in at €0.30 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the most recent consensus for NKT from five analysts is for revenues of €1.55b in 2021 which, if met, would be a credible 5.2% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 89% to €0.25. Yet prior to the latest earnings, the analysts had been forecasting revenues of €1.63b and losses of €0.17 per share in 2021. So it's pretty clear the analysts have mixed opinions on NKT after this update; revenues were downgraded and per-share losses expected to increase.
There was no major change to the consensus price target of kr.220, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. 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. There are some variant perceptions on NKT, with the most bullish analyst valuing it at kr.246 and the most bearish at kr.170 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
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. We can infer from the latest estimates that forecasts expect a continuation of NKT'shistorical trends, as next year's 5.2% revenue growth is roughly in line with 5.1% annual revenue growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 6.6% per year. So although NKT is expected to maintain its revenue growth rate, it's forecast to grow slower than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. 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 €220, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple NKT analysts - going out to 2022, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 1 warning sign for NKT that you should be aware of.
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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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