Earnings Report: The Hong Kong and China Gas Company Limited Missed Revenue Estimates By 8.2%

The Hong Kong and China Gas Company Limited (HKG:3) just released its latest yearly report and things are not looking great. Hong Kong and China Gas missed analyst forecasts, with revenues of HK$57b and statutory earnings per share (EPS) of HK$0.32, falling short by 8.2% and 3.6% respectively. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for Hong Kong and China Gas

Following the latest results, Hong Kong and China Gas' seven analysts are now forecasting revenues of HK$59.3b in 2024. This would be an okay 4.1% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to increase 5.3% to HK$0.34. In the lead-up to this report, the analysts had been modelling revenues of HK$64.2b and earnings per share (EPS) of HK$0.32 in 2024. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.

The average price target rose 5.6% to HK$6.30, with the analysts signalling that the improved earnings outlook is the key driver of value for shareholders - enough to offset the reduction in revenue estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Hong Kong and China Gas, with the most bullish analyst valuing it at HK$7.00 and the most bearish at HK$5.60 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Hong Kong and China Gas' past performance and to peers in the same industry. We would highlight that Hong Kong and China Gas' revenue growth is expected to slow, with the forecast 4.1% annualised growth rate until the end of 2024 being well below the historical 11% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 5.7% per year. Factoring in the forecast slowdown in growth, it seems obvious that Hong Kong and China Gas is also expected to grow slower than other industry participants.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Hong Kong and China Gas' earnings potential next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Even so, long term profitability is more important for the value creation process. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Hong Kong and China Gas going out to 2026, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for Hong Kong and China Gas that we have uncovered.

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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.