What You Need To Know About The A2A S.p.A. (BIT:A2A) Analyst Downgrade Today

Today is shaping up negative for A2A S.p.A. (BIT:A2A) shareholders, with the analysts delivering a substantial negative revision to next year's forecasts. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the latest downgrade, the current consensus, from the four analysts covering A2A, is for revenues of €16b in 2024, which would reflect a perceptible 5.9% reduction in A2A's sales over the past 12 months. Per-share earnings are expected to surge 61% to €0.19. Previously, the analysts had been modelling revenues of €19b and earnings per share (EPS) of €0.19 in 2024. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a measurable cut to revenues and reconfirming their earnings per share estimates.

View our latest analysis for A2A

It will come as no surprise then, that the consensus price target fell 6.1% to €2.06 following these changes.

Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 4.7% by the end of 2024. This indicates a significant reduction from annual growth of 31% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 0.02% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - A2A is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on A2A after today.

A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. To see more of our financial analysis, you can click through to our free platform to learn more about its balance sheet and specific concerns we've identified.

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

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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.