These Analysts Think China Oriental Group Company Limited's (HKG:581) Sales Are Under Threat

The analysts covering China Oriental Group Company Limited (HKG:581) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the consensus from three analysts covering China Oriental Group is for revenues of HK$28b in 2021, implying a painful 27% decline in sales compared to the last 12 months. Per-share earnings are expected to increase 2.9% to HK$0.64. Before this latest update, the analysts had been forecasting revenues of HK$40b and earnings per share (EPS) of HK$0.63 in 2021. Indeed we can see that the consensus opinion has undergone some fundamental changes following the recent consensus updates, with a sizeable cut to revenues and some minor tweaks to earnings numbers.

Check out our latest analysis for China Oriental Group

The consensus has reconfirmed its price target of CN¥2.43, showing that the analysts don't expect weaker sales expectationsthis year to have a material impact on China Oriental Group's market value. 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. Currently, the most bullish analyst values China Oriental Group at CN¥3.32 per share, while the most bearish prices it at CN¥2.25. This shows there is still some 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.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Over the past year, revenues have declined around 3.5% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for an annualised 27% decline in revenue until the end of 2021. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 7.4% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect China Oriental Group to suffer worse than the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on China Oriental Group after today.

There might be good reason for analyst bearishness towards China Oriental Group, like its declining profit margins. Learn more, and discover the 3 other concerns we've identified, for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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This article by Simply Wall St is general in nature. 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.
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