Results: Kao Corporation Exceeded Expectations And The Consensus Has Updated Its Estimates

The half-year results for Kao Corporation (TSE:4452) were released last week, making it a good time to revisit its performance. Revenues were JP¥788b, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of JP¥57.98 were also better than expected, beating analyst predictions by 14%. 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.

Check out our latest analysis for Kao

Following last week's earnings report, Kao's ten analysts are forecasting 2024 revenues to be JP¥1.60t, approximately in line with the last 12 months. Per-share earnings are expected to surge 51% to JP¥230. Before this earnings report, the analysts had been forecasting revenues of JP¥1.60t and earnings per share (EPS) of JP¥231 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.

The analysts reconfirmed their price target of JP¥7,203, showing that the business is executing well and in line with expectations. 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. There are some variant perceptions on Kao, with the most bullish analyst valuing it at JP¥8,100 and the most bearish at JP¥6,300 per share. This is a very narrow spread of estimates, implying either that Kao is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting Kao's growth to accelerate, with the forecast 2.8% annualised growth to the end of 2024 ranking favourably alongside historical growth of 1.6% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 3.9% annually. It seems obvious that, while the future growth outlook is brighter than the recent past, Kao is expected to grow slower than the wider industry.

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. 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.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Kao going out to 2026, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Kao , and understanding this should be part of your investment process.

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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.