The analysts might have been a bit too bullish on Alfa Laval AB (publ) (STO:ALFA), given that the company fell short of expectations when it released its third-quarter results last week. Results look to have been somewhat negative - revenue fell 7.6% short of analyst estimates at kr9.7b, and statutory earnings of kr2.46 per share missed forecasts by 7.8%. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the 13 analysts covering Alfa Laval provided consensus estimates of kr42.1b revenue in 2021, which would reflect a noticeable 3.8% decline on its sales over the past 12 months. Statutory earnings per share are predicted to increase 3.9% to kr10.94. Before this earnings report, the analysts had been forecasting revenues of kr42.9b and earnings per share (EPS) of kr11.00 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at kr223. 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. Currently, the most bullish analyst values Alfa Laval at kr276 per share, while the most bearish prices it at kr180. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Alfa Laval shareholders.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 3.8%, a significant reduction from annual 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 5.6% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Alfa Laval is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Alfa Laval's revenues are expected to perform worse 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 Alfa Laval. 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 Alfa Laval going out to 2024, and you can see them free on our platform here..
Before you take the next step you should know about the 1 warning sign for Alfa Laval that we have uncovered.
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