Danone SA (EPA:BN): Earnings Expected To Remain Subdued

After Danone SA’s (EPA:BN) recent earnings announcement in June 2018, analyst consensus outlook appear pessimistic, with earnings expected to decline by -8.1% in the upcoming year against the past 5-year average growth rate of 5.4%. Currently with a railing-twelve-month profit of €2.68b, the consensus growth rate suggests that earnings will drop to €2.46b by 2019. Below is a brief commentary on the longer term outlook the market has for Danone. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

Check out our latest analysis for Danone

Exciting times ahead?

The view from 25 analysts over the next three years is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
ENXTPA:BN Future Profit August 28th 18
ENXTPA:BN Future Profit August 28th 18
This results in an annual growth rate of 9.0% based on the most recent earnings level of €2.45b to the final forecast of €2.77b by 2021. EPS reaches €4.73 in the final year of forecast compared to the current €3.92 EPS today. The main reason for growth is a result of cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. In 2021, BN’s profit margin will have expanded from 9.9% to 10.1%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Danone, I’ve put together three fundamental factors you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Danone worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Danone is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Danone? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.