Revenue Miss: Keppel Ltd. Fell 20% Short Of Analyst Revenue Estimates And Analysts Have Been Revising Their Models

Keppel Ltd. (SGX:BN4) shareholders are probably feeling a little disappointed, since its shares fell 5.5% to S$6.22 in the week after its latest interim results. Keppel reported a serious miss, with revenue of S$3.2b falling a huge 20% short of analyst estimates. The bright side is that statutory earnings per share of S$0.49 were in line with forecasts. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Keppel after the latest results.

See our latest analysis for Keppel

After the latest results, the eleven analysts covering Keppel are now predicting revenues of S$7.02b in 2024. If met, this would reflect a solid 8.4% improvement in revenue compared to the last 12 months. Per-share earnings are expected to shoot up 24% to S$0.51. In the lead-up to this report, the analysts had been modelling revenues of S$7.28b and earnings per share (EPS) of S$0.55 in 2024. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.

Despite the cuts to forecast earnings, there was no real change to the S$8.16 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. Currently, the most bullish analyst values Keppel at S$9.00 per share, while the most bearish prices it at S$6.05. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

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. For example, we noticed that Keppel's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 18% growth to the end of 2024 on an annualised basis. That is well above its historical decline of 0.7% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 7.2% per year. Not only are Keppel's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Keppel. They also downgraded Keppel's revenue estimates, but industry data suggests that it is 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.

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 Keppel analysts - going out to 2026, and you can see them free on our platform here.

Even so, be aware that Keppel is showing 4 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com