Formosa Plastics Corporation (TWSE:1301) Analysts Are More Bearish Than They Used To Be

Today is shaping up negative for Formosa Plastics Corporation (TWSE:1301) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following this downgrade, Formosa Plastics' eight analysts are forecasting 2024 revenues to be NT$196b, approximately in line with the last 12 months. Per-share earnings are expected to soar 94% to NT$2.24. Prior to this update, the analysts had been forecasting revenues of NT$222b and earnings per share (EPS) of NT$3.47 in 2024. Indeed, we can see that the analysts are a lot more bearish about Formosa Plastics' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for Formosa Plastics

Analysts made no major changes to their price target of NT$81.33, suggesting the downgrades are not expected to have a long-term impact on Formosa Plastics' valuation.

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. We would highlight that sales are expected to reverse, with a forecast 1.4% annualised revenue decline to the end of 2024. That is a notable change from historical growth of 2.4% 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 8.4% annually for the foreseeable future. It's pretty clear that Formosa Plastics' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Formosa Plastics' revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Formosa Plastics.

There might be good reason for analyst bearishness towards Formosa Plastics, like the risk of cutting its dividend. For more information, you can click here to discover this and the 1 other flag we've identified.

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