Things Look Grim For Avio S.p.A. (BIT:AVIO) After Today's Downgrade

The latest analyst coverage could presage a bad day for Avio S.p.A. (BIT:AVIO), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the latest downgrade, the current consensus, from the four analysts covering Avio, is for revenues of €319m in 2021, which would reflect an uncomfortable 9.4% reduction in Avio's sales over the past 12 months. Statutory earnings per share are supposed to shrink 9.8% to €0.49 in the same period. Prior to this update, the analysts had been forecasting revenues of €355m and earnings per share (EPS) of €0.70 in 2021. Indeed, we can see that the analysts are a lot more bearish about Avio's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Avio

Analysts made no major changes to their price target of €15.20, suggesting the downgrades are not expected to have a long-term impact on Avio's valuation. 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. The most optimistic Avio analyst has a price target of €17.50 per share, while the most pessimistic values it at €12.00. 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.

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. One more thing stood out to us about these estimates, and it's the idea that Avio's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 9.4% to the end of 2021. This tops off a historical decline of 6.0% a year over the past three years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 6.6% annually. So while a broad number of companies are forecast to grow, unfortunately Avio is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Avio. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Avio.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Avio analysts - going out to 2023, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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