Earnings Miss: The Bank of East Asia, Limited Missed EPS By 8.3% And Analysts Are Revising Their Forecasts

As you might know, The Bank of East Asia, Limited (HKG:23) last week released its latest full-year, and things did not turn out so great for shareholders. Bank of East Asia missed analyst forecasts, with revenues of HK$16b and statutory earnings per share (EPS) of HK$1.53, falling short by 6.5% and 8.3% respectively. 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for Bank of East Asia

Taking into account the latest results, the most recent consensus for Bank of East Asia from eight analysts is for revenues of HK$17.6b in 2022 which, if met, would be a notable 11% increase on its sales over the past 12 months. Statutory earnings per share are forecast to decrease 8.2% to HK$1.66 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of HK$18.0b and earnings per share (EPS) of HK$1.65 in 2022. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.

The average price target was steady at HK$15.07even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. 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 Bank of East Asia analyst has a price target of HK$18.10 per share, while the most pessimistic values it at HK$12.50. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Bank of East Asia's past performance and to peers in the same industry. For example, we noticed that Bank of East Asia's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 11% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 0.04% a year 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 revenue grow 8.9% per year. So while Bank of East Asia's revenues are expected to improve, it seems that it is expected to grow at about the same rate as the overall industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. They also downgraded their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as 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 HK$15.07, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Bank of East Asia. Long-term earnings power is much more important than next year's profits. We have forecasts for Bank of East Asia 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 1 warning sign for Bank of East Asia that you should be aware of.

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

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.