Nestlé (Malaysia) Berhad Recorded A 13% Miss On Revenue: Analysts Are Revisiting Their Models

Nestlé (Malaysia) Berhad (KLSE:NESTLE) shareholders are probably feeling a little disappointed, since its shares fell 5.4% to RM116 in the week after its latest second-quarter results. Revenues were RM1.5b, 13% below analyst expectations, although losses didn't appear to worsen significantly, with a per-share statutory loss of RM2.81 being in line with what the analysts forecast. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Nestlé (Malaysia) Berhad

Taking into account the latest results, Nestlé (Malaysia) Berhad's twelve analysts currently expect revenues in 2024 to be RM6.86b, approximately in line with the last 12 months. Per-share earnings are expected to rise 9.6% to RM2.67. In the lead-up to this report, the analysts had been modelling revenues of RM7.26b and earnings per share (EPS) of RM3.25 in 2024. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a substantial drop in earnings per share estimates.

It'll come as no surprise then, to learn that the analysts have cut their price target 7.2% to RM119. 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. The most optimistic Nestlé (Malaysia) Berhad analyst has a price target of RM138 per share, while the most pessimistic values it at RM101. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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 Nestlé (Malaysia) Berhad's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 2.7% growth on an annualised basis. This is compared to a historical growth rate of 6.3% 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 3.6% per year. Factoring in the forecast slowdown in growth, it seems obvious that Nestlé (Malaysia) Berhad is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

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. At Simply Wall St, we have a full range of analyst estimates for Nestlé (Malaysia) Berhad going out to 2026, and you can see them free on our platform here..

However, before you get too enthused, we've discovered 2 warning signs for Nestlé (Malaysia) Berhad (1 is concerning!) that you should be aware of.

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.

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