PCCW Limited Reported A Surprise Loss, And Analysts Have Updated Their Forecasts

PCCW Limited (HKG:8) shareholders are probably feeling a little disappointed, since its shares fell 3.3% to HK$4.37 in the week after its latest full-year results. Revenues came in at HK$38b, in line with estimates, while PCCW reported a statutory loss of HK$0.13 per share, well short of prior analyst forecasts for a profit. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for PCCW

Taking into account the latest results, PCCW's four analysts currently expect revenues in 2021 to be HK$38.6b, approximately in line with the last 12 months. Earnings are expected to improve, with PCCW forecast to report a statutory profit of HK$0.082 per share. Before this earnings report, the analysts had been forecasting revenues of HK$37.7b and earnings per share (EPS) of HK$0.098 in 2021. So it's pretty clear the analysts have mixed opinions on PCCW after the latest results; even though they upped their revenue numbers, it came at the cost of a substantial drop in per-share earnings expectations.

There's been no major changes to the price target of HK$5.04, suggesting that the impact of higher forecast sales and lower earnings won't result in a meaningful change to the business' 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. The most optimistic PCCW analyst has a price target of HK$5.40 per share, while the most pessimistic values it at HK$4.90. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's also worth noting that the years of declining sales look to have come to an end, with the forecast for flat revenues next year. Historically, PCCW's sales have shrunk approximately 0.5% annually 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 4.6% per year. So it's pretty clear that, although revenues are improving, PCCW is still expected to grow slower than the industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for PCCW. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. The consensus price target held steady at HK$5.04, 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 PCCW. Long-term earnings power is much more important than next year's profits. We have forecasts for PCCW going out to 2023, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 2 warning signs for PCCW (1 doesn't sit too well with us!) that you need to be mindful of.

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