Earnings Miss: Kao Corporation Missed EPS By 7.9% And Analysts Are Revising Their Forecasts

Kao Corporation (TSE:4452) shareholders are probably feeling a little disappointed, since its shares fell 3.5% to JP¥6,305 in the week after its latest quarterly results. Revenues of JP¥402b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at JP¥59.44, missing estimates by 7.9%. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Kao after the latest results.

View our latest analysis for Kao

Following the latest results, Kao's ten analysts are now forecasting revenues of JP¥1.67t in 2025. This would be a reasonable 4.3% improvement in revenue compared to the last 12 months. Per-share earnings are expected to shoot up 47% to JP¥261. Yet prior to the latest earnings, the analysts had been anticipated revenues of JP¥1.67t and earnings per share (EPS) of JP¥261 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.

It will come as no surprise then, to learn that the consensus price target is largely unchanged at JP¥7,210. 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. Currently, the most bullish analyst values Kao at JP¥8,400 per share, while the most bearish prices it at JP¥5,700. 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. The analysts are definitely expecting Kao's growth to accelerate, with the forecast 3.4% annualised growth to the end of 2025 ranking favourably alongside historical growth of 2.0% per annum 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 4.5% per year. So it's clear that despite the acceleration in growth, Kao is expected to grow meaningfully slower than the industry average.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at JP¥7,210, 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 Kao analysts - going out to 2026, and you can see them free on our platform here.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.