The Consensus EPS Estimates For DFDS A/S (CPH:DFDS) Just Fell Dramatically

Today is shaping up negative for DFDS A/S (CPH:DFDS) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. The stock price has risen 5.7% to kr.259 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following the downgrade, the consensus from three analysts covering DFDS is for revenues of kr.22b in 2023, implying a discernible 2.9% decline in sales compared to the last 12 months. Per-share earnings are expected to bounce 27% to kr.28.83. Previously, the analysts had been modelling revenues of kr.26b and earnings per share (EPS) of kr.32.02 in 2023. It looks like analyst sentiment has fallen somewhat in this update, with a measurable cut to revenue estimates and a minor downgrade to earnings per share numbers as well.

Check out our latest analysis for DFDS

Analysts made no major changes to their price target of kr.390, suggesting the downgrades are not expected to have a long-term impact on DFDS' 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. The most optimistic DFDS analyst has a price target of kr.460 per share, while the most pessimistic values it at kr.335. 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.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 2.3% by the end of 2023. This indicates a significant reduction from annual growth of 5.1% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 12% per year. The forecasts do look comparatively optimistic for DFDS, since they're expecting it to shrink slower than the industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Sadly they also cut their revenue estimates, although at least the company is expected to perform a bit better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on DFDS after the downgrade.

Unfortunately, the earnings downgrade - if accurate - may also place pressure on DFDS' mountain of debt, which could lead to some belt tightening for shareholders. You can learn more about our debt analysis for free on our platform here.

We also provide an overview of the DFDS Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, 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.