Earnings Beat: Kao Corporation Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

A week ago, Kao Corporation (TSE:4452) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. Kao beat earnings, with revenues hitting JP¥390b, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 11%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

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Taking into account the latest results, Kao's ten analysts currently expect revenues in 2025 to be JP¥1.68t, approximately in line with the last 12 months. Statutory earnings per share are predicted to rise 4.9% to JP¥258. In the lead-up to this report, the analysts had been modelling revenues of JP¥1.68t and earnings per share (EPS) of JP¥257 in 2025. 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.

View our latest analysis for Kao

It will come as no surprise then, to learn that the consensus price target is largely unchanged at JP¥7,233. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Kao, with the most bullish analyst valuing it at JP¥8,900 and the most bearish at JP¥6,700 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that Kao's revenue growth will slow down substantially, with revenues to the end of 2025 expected to display 2.4% growth on an annualised basis. This is compared to a historical growth rate of 3.2% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 3.8% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Kao.

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. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Kao. Long-term earnings power is much more important than next year's profits. We have forecasts for Kao going out to 2027, and you can see them free on our platform here.

You can also see our analysis of Kao's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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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.