Analysts Just Made A Major Revision To Their Muhibbah Engineering (M) Bhd. (KLSE:MUHIBAH) Revenue Forecasts

One thing we could say about the analysts on Muhibbah Engineering (M) Bhd. (KLSE:MUHIBAH) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. Shares are up 4.8% to RM0.98 in the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the latest downgrade, the four analysts covering Muhibbah Engineering (M) Bhd provided consensus estimates of RM1.0b revenue in 2021, which would reflect a measurable 2.8% decline on its sales over the past 12 months. Before the latest update, the analysts were foreseeing RM1.2b of revenue in 2021. The consensus view seems to have become more pessimistic on Muhibbah Engineering (M) Bhd, noting the substantial drop in revenue estimates in this update.

See our latest analysis for Muhibbah Engineering (M) Bhd

The consensus price target fell 11% to RM1.04, with the analysts clearly less optimistic about Muhibbah Engineering (M) Bhd's valuation following this update. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Muhibbah Engineering (M) Bhd, with the most bullish analyst valuing it at RM1.30 and the most bearish at RM0.81 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Muhibbah Engineering (M) Bhd's past performance and to peers in the same industry. We would also point out that the forecast 2.8% annualised revenue decline to the end of 2021 is better than the historical trend, which saw revenues shrink 6.9% annually over the past five years By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 11% per year. So while a broad number of companies are forecast to grow, unfortunately Muhibbah Engineering (M) Bhd is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They also expect company revenue to perform worse than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Muhibbah Engineering (M) Bhd going forwards.

Unfortunately, the earnings downgrade - if accurate - may also place pressure on Muhibbah Engineering (M) Bhd's mountain of debt, which could lead to some belt tightening for shareholders. See why we're concerned about Muhibbah Engineering (M) Bhd's balance sheet by visiting our risks dashboard for free on our platform here.

You can also see our analysis of Muhibbah Engineering (M) Bhd's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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