Asian Paints Limited (NSE:ASIANPAINT) missed earnings with its latest quarterly results, disappointing overly-optimistic analysts. Results look to have been somewhat negative – revenue fell 4.3% short of analyst estimates at ₹54b, and statutory earnings of ₹7.97 per share missed forecasts by 2.9%. Earnings are an important time for investors, as they can track a company’s performance, look at what top analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether analysts have changed their mind on Asian Paints after the latest results.
Taking into account the latest results, the current consensus from Asian Paints’s 26 analysts is for revenues of ₹241.2b in 2021, which would reflect a decent 18% increase on its sales over the past 12 months. Statutory earnings per share are expected to bounce 23% to ₹34.78. In the lead-up to this report, analysts had been modelling revenues of ₹247.7b and earnings per share (EPS) of ₹35.57 in 2021. It’s pretty clear that analyst sentiment has fallen after the latest results, leading to lower revenue forecasts and a small dip in earnings per share estimates.
Despite the cuts to forecast earnings, there was no real change to the ₹1,864 price target, showing that analysts don’t think the changes have a meaningful impact on the stock’s intrinsic value. 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. The most optimistic Asian Paints analyst has a price target of ₹2,120 per share, while the most pessimistic values it at ₹1,535. 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.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Asian Paints’s performance in recent years. It’s clear from the latest estimates that Asian Paints’s rate of growth is expected to accelerate meaningfully, with forecast 18% revenue growth noticeably faster than its historical growth of 7.9%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 13% per year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect Asian Paints to grow faster than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Asian Paints. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider market. The consensus price target held steady at ₹1,864, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
Still, 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 Asian Paints going out to 2022, and you can see them free on our platform here..
We also provide an overview of the Asian Paints Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.