Earnings Miss: KESM Industries Berhad Missed EPS By 66% And Analysts Are Revising Their Forecasts

As you might know, KESM Industries Berhad (KLSE:KESM) recently reported its full-year numbers. It looks like a pretty bad result, all things considered. Although revenues of RM257m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 66% to hit RM0.039 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. 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 KESM Industries Berhad

After the latest results, the three analysts covering KESM Industries Berhad are now predicting revenues of RM268.1m in 2023. If met, this would reflect a credible 4.5% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to leap 85% to RM0.071. In the lead-up to this report, the analysts had been modelling revenues of RM273.2m and earnings per share (EPS) of RM0.22 in 2023. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a pretty serious reduction to EPS estimates.

The average price target fell 6.7% to RM7.18, with reduced earnings forecasts clearly tied to a lower valuation estimate. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on KESM Industries Berhad, with the most bullish analyst valuing it at RM7.47 and the most bearish at RM6.76 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One thing stands out from these estimates, which is that KESM Industries Berhad is forecast to grow faster in the future than it has in the past, with revenues expected to display 4.5% annualised growth until the end of 2023. If achieved, this would be a much better result than the 9.1% annual decline 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 15% per year. So although KESM Industries Berhad's revenue growth is expected to improve, it is still expected to grow slower than the industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for KESM Industries Berhad. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of KESM Industries Berhad's future valuation.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for KESM Industries Berhad going out to 2025, and you can see them free on our platform here..

You still need to take note of risks, for example - KESM Industries Berhad has 3 warning signs (and 1 which shouldn't be ignored) we think 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.