UMW Holdings Berhad Earnings Missed Analyst Estimates: Here's What Analysts Are Forecasting Now

Investors in UMW Holdings Berhad (KLSE:UMW) had a good week, as its shares rose 4.5% to close at RM2.80 following the release of its second-quarter results. Revenues fell badly short of expectations, with sales of RM1.5b missing analyst predictions by 41%. Unsurprisingly, the statutory profit the analysts had been forecasting evaporated, turning into a loss of RM0.067 per share. 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 UMW Holdings Berhad after the latest results.

View our latest analysis for UMW Holdings Berhad

Following last week's earnings report, UMW Holdings Berhad's twelve analysts are forecasting 2020 revenues to be RM9.25b, approximately in line with the last 12 months. Statutory earnings per share are expected to plummet 47% to RM0.13 in the same period. In the lead-up to this report, the analysts had been modelling revenues of RM9.09b and earnings per share (EPS) of RM0.12 in 2020. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the nice gain to earnings per share expectations following these results.

The consensus price target rose 7.4% to RM2.93, suggesting that higher earnings estimates flow through to the stock's valuation as well. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic UMW Holdings Berhad analyst has a price target of RM3.40 per share, while the most pessimistic values it at RM2.15. 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. We would also point out that the forecast 1.9% revenue decline is better than the historical trend, which saw revenues shrink 4.7% annually over the past five years

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards UMW Holdings Berhad following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that UMW Holdings Berhad's revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

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 UMW Holdings Berhad going out to 2023, and you can see them free on our platform here.

You still need to take note of risks, for example - UMW Holdings Berhad has 1 warning sign we think you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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