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

It's been a good week for Renesas Electronics Corporation (TSE:6723) shareholders, because the company has just released its latest quarterly results, and the shares gained 6.0% to JP¥2,540. It looks like a credible result overall - although revenues of JP¥352b were what the analysts expected, Renesas Electronics surprised by delivering a (statutory) profit of JP¥44.90 per share, an impressive 28% above what was forecast. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Renesas Electronics

Taking into account the latest results, the most recent consensus for Renesas Electronics from 14 analysts is for revenues of JP¥1.52t in 2024. If met, it would imply a reasonable 3.7% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to accumulate 6.0% to JP¥186. Yet prior to the latest earnings, the analysts had been anticipated revenues of JP¥1.52t and earnings per share (EPS) of JP¥170 in 2024. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

There's been no major changes to the consensus price target of JP¥3,348, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Renesas Electronics, with the most bullish analyst valuing it at JP¥4,000 and the most bearish at JP¥2,900 per share. 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.

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. It's pretty clear that there is an expectation that Renesas Electronics' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 4.9% growth on an annualised basis. This is compared to a historical growth rate of 20% 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 13% per year. Factoring in the forecast slowdown in growth, it seems obvious that Renesas Electronics is also expected to grow slower than other industry participants.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Renesas Electronics' earnings potential next year. 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¥3,348, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Renesas Electronics. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Renesas Electronics 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 Renesas Electronics 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.