Earnings Release: Here's Why Analysts Cut Their PETRONAS Chemicals Group Berhad (KLSE:PCHEM) Price Target To RM5.89

It's been a good week for PETRONAS Chemicals Group Berhad (KLSE:PCHEM) shareholders, because the company has just released its latest quarterly results, and the shares gained 2.0% to RM5.49. Results were roughly in line with estimates, with revenues of RM7.7b and statutory earnings per share of RM0.21. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for PETRONAS Chemicals Group Berhad

After the latest results, the 18 analysts covering PETRONAS Chemicals Group Berhad are now predicting revenues of RM30.5b in 2024. If met, this would reflect a satisfactory 4.3% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to ascend 18% to RM0.29. Before this earnings report, the analysts had been forecasting revenues of RM30.5b and earnings per share (EPS) of RM0.29 in 2024. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

The consensus price target fell 6.6% to RM5.89, suggesting that the analysts might have been a bit enthusiastic in their previous valuation - or they were expecting the company to provide stronger guidance in the quarterly results. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on PETRONAS Chemicals Group Berhad, with the most bullish analyst valuing it at RM7.54 and the most bearish at RM4.18 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await PETRONAS Chemicals Group Berhad shareholders.

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 PETRONAS Chemicals Group Berhad's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 8.8% growth on an annualised basis. This is compared to a historical growth rate of 16% 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 6.1% annually. Even after the forecast slowdown in growth, it seems obvious that PETRONAS Chemicals Group Berhad is also expected to grow faster 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. Fortunately, they also reconfirmed their revenue numbers, suggesting that it's tracking in line with expectations. Additionally, our data suggests that revenue is expected to grow faster than the wider industry. 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. We have forecasts for PETRONAS Chemicals Group Berhad 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 2 warning signs with PETRONAS Chemicals Group Berhad , and understanding these 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.