Results: Japan Tobacco Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates

Japan Tobacco Inc. (TSE:2914) defied analyst predictions to release its first-quarter results, which were ahead of market expectations. Results were good overall, with revenues beating analyst predictions by 3.2% to hit JP¥740b. Statutory earnings per share (EPS) came in at JP¥88.58, some 9.3% above whatthe analysts had expected. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for Japan Tobacco

Taking into account the latest results, the most recent consensus for Japan Tobacco from twelve analysts is for revenues of JP¥2.98t in 2024. If met, it would imply an okay 2.4% increase on its revenue over the past 12 months. Statutory per share are forecast to be JP¥276, approximately in line with the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of JP¥2.98t and earnings per share (EPS) of JP¥275 in 2024. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

There were no changes to revenue or earnings estimates or the price target of JP¥4,100, suggesting that the company has met expectations in its recent result. 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 Japan Tobacco analyst has a price target of JP¥4,750 per share, while the most pessimistic values it at JP¥3,353. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Japan Tobacco's past performance and to peers in the same industry. We would highlight that Japan Tobacco's revenue growth is expected to slow, with the forecast 3.1% annualised growth rate until the end of 2024 being well below the historical 6.8% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.7% per year. Factoring in the forecast slowdown in growth, it seems obvious that Japan Tobacco is also expected to grow slower than other industry participants.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Japan Tobacco's revenue is expected to perform worse than the wider industry. The consensus price target held steady at JP¥4,100, with the latest estimates not enough to have an impact on their price targets.

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 Japan Tobacco analysts - going out to 2026, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 1 warning sign for Japan Tobacco you should know about.

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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.