Investors in Voltas Limited (NSE:VOLTAS) had a good week, as its shares rose 7.7% to close at ₹765 following the release of its quarterly results. Revenues came in at ₹16b, greatly exceeding expectations even though statutory earnings per share (EPS) of ₹2.37 missed forecasts by 4.6%. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus from Voltas' 23 analysts is for revenues of ₹70.0b in 2021, which would reflect a meaningful 8.0% increase on its sales over the past 12 months. Per-share earnings are expected to surge 21% to ₹14.84. Before this earnings report, the analysts had been forecasting revenues of ₹66.0b and earnings per share (EPS) of ₹13.28 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a nice gain to earnings per share in particular.
It will come as no surprise to learn that the analysts have increased their price target for Voltas 12% to ₹750on the back of these upgrades. 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 Voltas at ₹980 per share, while the most bearish prices it at ₹530. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Voltas' past performance and to peers in the same industry. It's clear from the latest estimates that Voltas' rate of growth is expected to accelerate meaningfully, with the forecast 8.0% revenue growth noticeably faster than its historical growth of 5.9%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 14% next year. So it's clear that despite the acceleration in growth, Voltas is expected to grow meaningfully slower than the industry average.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Voltas following these results. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Voltas. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Voltas analysts - going out to 2024, and you can see them free on our platform here.
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