Volvo Car AB (publ.) Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

It's been a good week for Volvo Car AB (publ.) (STO:VOLCAR B) shareholders, because the company has just released its latest full-year results, and the shares gained 2.8% to kr69.72. Volvo Car AB (publ.) reported kr282b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of kr4.72 beat expectations, being 7.1% higher than what the analysts expected. 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.

View our latest analysis for Volvo Car AB (publ.)

Taking into account the latest results, the current consensus from Volvo Car AB (publ.)'s eight analysts is for revenues of kr332.1b in 2022, which would reflect a decent 18% increase on its sales over the past 12 months. Statutory earnings per share are predicted to expand 20% to kr4.90. In the lead-up to this report, the analysts had been modelling revenues of kr327.1b and earnings per share (EPS) of kr5.11 in 2022. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.

The consensus price target held steady at kr79.13, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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. The most optimistic Volvo Car AB (publ.) analyst has a price target of kr93.00 per share, while the most pessimistic values it at kr61.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Volvo Car AB (publ.)'s rate of growth is expected to accelerate meaningfully, with the forecast 18% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 8.4% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 5.8% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Volvo Car AB (publ.) to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Volvo Car AB (publ.). Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Volvo Car AB (publ.) going out to 2024, and you can see them free on our platform here..

And what about risks? Every company has them, and we've spotted 1 warning sign for Volvo Car AB (publ.) 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.