Air France-KLM SA Just Missed Earnings - But Analysts Have Updated Their Models

Last week saw the newest half-year earnings release from Air France-KLM SA (EPA:AF), an important milestone in the company's journey to build a stronger business. It looks like a pretty bad result, all things considered. Although revenues of €15b were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 76% to hit €0.41 per share. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Air France-KLM

After the latest results, the 16 analysts covering Air France-KLM are now predicting revenues of €31.3b in 2024. If met, this would reflect a satisfactory 2.1% improvement in revenue compared to the last 12 months. Per-share earnings are expected to leap 419% to €2.21. Before this earnings report, the analysts had been forecasting revenues of €31.4b and earnings per share (EPS) of €3.15 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 large cut to EPS estimates.

It might be a surprise to learn that the consensus price target was broadly unchanged at €11.43, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. There are some variant perceptions on Air France-KLM, with the most bullish analyst valuing it at €27.50 and the most bearish at €7.50 per share. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

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. It's pretty clear that there is an expectation that Air France-KLM's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 4.2% growth on an annualised basis. This is compared to a historical growth rate of 8.7% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 6.3% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Air France-KLM.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Air France-KLM. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at €11.43, 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 Air France-KLM analysts - going out to 2026, and you can see them free on our platform here.

You still need to take note of risks, for example - Air France-KLM has 2 warning signs we think you should be aware of.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com