Last week saw the newest quarterly earnings release from Airtel Africa Plc (LON:AAF), an important milestone in the company's journey to build a stronger business. Revenues of US$970m beat forecasts by 11%, although statutory earnings per share disappointed slightly, coming in 5.0% below expectations at US$0.019. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Following last week's earnings report, Airtel Africa's seven analysts are forecasting 2021 revenues to be US$3.57b, approximately in line with the last 12 months. Statutory per-share earnings are expected to be US$0.07, roughly flat on the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of US$3.59b and earnings per share (EPS) of US$0.072 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$0.88, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Airtel Africa, with the most bullish analyst valuing it at US$0.89 and the most bearish at US$0.57 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.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 1.0%, a significant reduction from annual growth of 12% over the last year. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 1.4% next year. It's pretty clear that Airtel Africa's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Airtel Africa. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Airtel Africa's revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$0.88, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Airtel Africa analysts - going out to 2024, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Airtel Africa that you should be aware of.
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