News Flash: 2 Analysts Think Mota-Engil, SGPS, S.A. (ELI:EGL) Earnings Are Under Threat

By
Simply Wall St
Published
December 05, 2020
ENXTLS:EGL
Source: Shutterstock

Today is shaping up negative for Mota-Engil, SGPS, S.A. (ELI:EGL) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the latest downgrade, the twin analysts covering Mota-Engil SGPS provided consensus estimates of €2.5b revenue in 2020, which would reflect a small 5.2% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to crater 82% to €0.01 in the same period. Before this latest update, the analysts had been forecasting revenues of €2.9b and earnings per share (EPS) of €0.049 in 2020. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.

Check out our latest analysis for Mota-Engil SGPS

earnings-and-revenue-growth
ENXTLS:EGL Earnings and Revenue Growth December 6th 2020

Despite the cuts to forecast earnings, there was no real change to the €3.20 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Mota-Engil SGPS analyst has a price target of €4.50 per share, while the most pessimistic values it at €2.00. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

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. We would highlight that sales are expected to reverse, with the forecast 5.2% revenue decline a notable change from historical growth of 4.7% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.4% annually for the foreseeable future. It's pretty clear that Mota-Engil SGPS' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Mota-Engil SGPS.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Mota-Engil SGPS, including its declining profit margins. For more information, you can click here to discover this and the 4 other concerns we've identified.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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