Motherson Sumi Systems Limited Just Missed EPS By 11%: Here's What Analysts Think Will Happen Next

It's shaping up to be a tough period for Motherson Sumi Systems Limited (NSE:MOTHERSUMI), which a week ago released some disappointing quarterly results that could have a notable impact on how the market views the stock. Motherson Sumi Systems missed earnings this time around, with ₹150b revenue coming in 3.3% below what the analysts had modelled. Statutory earnings per share (EPS) of ₹1.07 also fell short of expectations by 11%. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

Check out our latest analysis for Motherson Sumi Systems

Taking into account the latest results, the consensus forecast from Motherson Sumi Systems' 19 analysts is for revenues of ₹580.8b in 2021, which would reflect a satisfactory 5.1% improvement in sales compared to the last 12 months. Per-share earnings are expected to leap 346% to ₹2.07. In the lead-up to this report, the analysts had been modelling revenues of ₹575.5b and earnings per share (EPS) of ₹1.97 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 5.8% to ₹130. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Motherson Sumi Systems at ₹160 per share, while the most bearish prices it at ₹85.92. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Motherson Sumi Systems' revenue growth is expected to slow, with forecast 5.1% increase next year well below the historical 12%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 16% next year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Motherson Sumi Systems.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Motherson Sumi Systems' earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Motherson Sumi Systems' revenues are expected to perform worse than the wider industry. 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Motherson Sumi Systems analysts - 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 3 warning signs for Motherson Sumi Systems (1 is a bit concerning!) that you need to be mindful of.

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