China Feihe Limited (HKG:6186) Analysts Are Reducing Their Forecasts For This Year

The analysts covering China Feihe Limited (HKG:6186) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the 15 analysts covering China Feihe provided consensus estimates of CN¥22b revenue in 2022, which would reflect a perceptible 3.7% decline on its sales over the past 12 months. Statutory earnings per share are supposed to shrink 9.2% to CN¥0.70 in the same period. Previously, the analysts had been modelling revenues of CN¥25b and earnings per share (EPS) of CN¥0.80 in 2022. Indeed, we can see that the analysts are a lot more bearish about China Feihe's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for China Feihe

The consensus price target fell 11% to CN¥8.00, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. The most optimistic China Feihe analyst has a price target of CN¥12.65 per share, while the most pessimistic values it at CN¥5.85. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 3.7% by the end of 2022. This indicates a significant reduction from annual growth of 27% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.8% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - China Feihe is expected to lag the wider 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. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of China Feihe.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with China Feihe, including concerns around earnings quality. For more information, you can click here to discover this and the 1 other concern we've identified.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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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.