Koninklijke Philips N.V. (AMS:PHIA) defied analyst predictions to release its quarterly results, which were ahead of market expectations. The company beat both earnings and revenue forecasts, with revenue of €5.0b, some 3.7% above estimates, and statutory earnings per share (EPS) coming in at €0.37, 41% ahead of expectations. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for Koninklijke Philips from 19 analysts is for revenues of €20.0b in 2021 which, if met, would be an okay 2.5% increase on its sales over the past 12 months. Per-share earnings are expected to leap 32% to €1.72. Yet prior to the latest earnings, the analysts had been anticipated revenues of €20.6b and earnings per share (EPS) of €1.80 in 2021. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a minor downgrade to earnings per share estimates.
The analysts made no major changes to their price target of €48.52, suggesting the downgrades are not expected to have a long-term impact on Koninklijke Philips' valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Koninklijke Philips at €58.00 per share, while the most bearish prices it at €38.00. 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.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One thing stands out from these estimates, which is that Koninklijke Philips is forecast to grow faster in the future than it has in the past, with revenues expected to grow 2.5%. If achieved, this would be a much better result than the 2.0% 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 8.1% per year. So although Koninklijke Philips' 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 Koninklijke Philips. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at €48.52, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Koninklijke Philips analysts - going out to 2024, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for Koninklijke Philips that you should be aware of.
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