Earnings Miss: MTR Corporation Limited Missed EPS By 41% And Analysts Are Revising Their Forecasts

The half-yearly results for MTR Corporation Limited (HKG:66) were released last week, making it a good time to revisit its performance. Results were mixed, with revenues of HK$22b exceeding expectations, even as statutory earnings per share (EPS) fell badly short. Earnings were HK$0.43 per share, -41% short of analyst expectations. 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 collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Check out our latest analysis for MTR

Following the latest results, MTR's eleven analysts are now forecasting revenues of HK$46.7b in 2021. This would be a reasonable 7.9% improvement in sales compared to the last 12 months. MTR is also expected to turn profitable, with statutory earnings of HK$1.40 per share. In the lead-up to this report, the analysts had been modelling revenues of HK$47.2b and earnings per share (EPS) of HK$1.42 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

There were no changes to revenue or earnings estimates or the price target of HK$48.34, suggesting that the company has met expectations in its recent result. 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. There are some variant perceptions on MTR, with the most bullish analyst valuing it at HK$55.60 and the most bearish at HK$36.00 per share. 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 MTR's past performance and to peers in the same industry. For example, we noticed that MTR's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 16% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 1.0% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 7.4% annually. So it looks like MTR is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target held steady at HK$48.34, 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. At Simply Wall St, we have a full range of analyst estimates for MTR going out to 2023, and you can see them free on our platform here..

You should always think about risks though. Case in point, we've spotted 1 warning sign for MTR you should be aware of.

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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.
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