Essity AB (publ) Recorded A 12% Miss On Revenue: Analysts Are Revisiting Their Models

The analysts might have been a bit too bullish on Essity AB (publ) (STO:ESSITY B), given that the company fell short of expectations when it released its full-year results last week. It looks like a weak result overall, with both revenues and earnings falling well short of analyst predictions. Revenues of kr147b missed by 12%, and statutory earnings per share of kr13.60 fell short of forecasts by 4.7%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Essity

After the latest results, the twelve analysts covering Essity are now predicting revenues of kr154.1b in 2024. If met, this would reflect an okay 4.7% improvement in revenue compared to the last 12 months. Per-share earnings are expected to soar 36% to kr17.97. Before this earnings report, the analysts had been forecasting revenues of kr158.7b and earnings per share (EPS) of kr18.00 in 2024. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.

The consensus has reconfirmed its price target of kr284, showing that the analysts don't expect weaker revenue expectations next year to have a material impact on Essity's market 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 Essity analyst has a price target of kr336 per share, while the most pessimistic values it at kr235. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Essity's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 4.7% growth on an annualised basis. This is compared to a historical growth rate of 6.6% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 2.3% per year. Even after the forecast slowdown in growth, it seems obvious that Essity is also expected to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. They also downgraded Essity's revenue estimates, but industry data suggests that it is expected to grow faster than the wider industry. Yet - earnings are more important to the intrinsic value of the business. The consensus price target held steady at kr284, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Essity. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Essity analysts - going out to 2026, and you can see them free on our platform here.

Even so, be aware that Essity is showing 2 warning signs in our investment analysis , 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.