Earnings Miss: Formosa Petrochemical Corporation Missed EPS By 42% And Analysts Are Revising Their Forecasts

Last week saw the newest quarterly earnings release from Formosa Petrochemical Corporation (TWSE:6505), an important milestone in the company's journey to build a stronger business. Statutory earnings per share fell badly short of expectations, coming in at NT$0.53, some 42% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at NT$171b. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. 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 Formosa Petrochemical

Following last week's earnings report, Formosa Petrochemical's eight analysts are forecasting 2024 revenues to be NT$698.6b, approximately in line with the last 12 months. Per-share earnings are expected to climb 15% to NT$2.73. Before this earnings report, the analysts had been forecasting revenues of NT$717.1b and earnings per share (EPS) of NT$3.17 in 2024. The analysts seem less optimistic after the recent results, reducing their revenue forecasts and making a real cut to earnings per share numbers.

The analysts made no major changes to their price target of NT$80.88, suggesting the downgrades are not expected to have a long-term impact on Formosa Petrochemical's valuation. 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 Formosa Petrochemical at NT$100.00 per share, while the most bearish prices it at NT$65.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Formosa Petrochemical's past performance and to peers in the same industry. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 0.1% by the end of 2024. This indicates a significant reduction from annual growth of 5.3% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 1.7% per year. The forecasts do look comparatively optimistic for Formosa Petrochemical, since they're expecting it to shrink slower than the 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. Unfortunately, they also downgraded their revenue estimates, and our data indicates that is expected to perform better than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. 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 said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Formosa Petrochemical analysts - going out to 2026, and you can see them free on our platform here.

Plus, you should also learn about the 1 warning sign we've spotted with Formosa Petrochemical .

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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.