Earnings Release: Here's Why Analysts Cut Their AmRest Holdings SE (WSE:EAT) Price Target To zł29.28

AmRest Holdings SE (WSE:EAT) last week reported its latest first-quarter results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. The results were positive, with revenue coming in at €372m, beating analyst expectations by 2.8%. 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've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for AmRest Holdings

Following the latest results, AmRest Holdings' five analysts are now forecasting revenues of €2.05b in 2021. This would be a major 38% improvement in sales compared to the last 12 months. Statutory losses are forecast to balloon 64% to €0.26 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of €2.07b and earnings per share (EPS) of €0.099 in 2021. So despite reconfirming their revenue estimates, the analysts are now forecasting a loss instead of a profit, which looks like a definite drop in sentiment following the latest results.

With the increase in forecast losses for next year, it's perhaps no surprise to see that the average price target dipped 18% to zł29.28, with the analysts signalling that growing losses would be a definite concern. 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. The most optimistic AmRest Holdings analyst has a price target of zł32.80 per share, while the most pessimistic values it at zł27.20. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

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 clear from the latest estimates that AmRest Holdings' rate of growth is expected to accelerate meaningfully, with the forecast 53% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 15% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 17% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect AmRest Holdings to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts are expecting AmRest Holdings to become unprofitable next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster 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 AmRest Holdings' future valuation.

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 estimates - from multiple AmRest Holdings analysts - going out to 2025, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 1 warning sign for AmRest Holdings that you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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