These Analysts Think EVA Airways Corp.'s (TPE:2618) Earnings Are Under Threat

Market forces rained on the parade of EVA Airways Corp. (TPE:2618) shareholders today, when the analysts downgraded their forecasts for next year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the latest downgrade, the three analysts covering EVA Airways provided consensus estimates of NT$109b revenue in 2021, which would reflect a discernible 5.7% decline on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 23% to NT$0.46. Before this latest update, the analysts had been forecasting revenues of NT$133b and earnings per share (EPS) of NT$0.27 in 2021. So we can see that the consensus has become notably more bearish on EVA Airways' outlook with these numbers, making a substantial drop in next year's revenue estimates. Furthermore, they expect the business to be loss-making next year, compared to their previous forecasts of a profit.

Check out our latest analysis for EVA Airways

Analysts lifted their price target 13% to NT$12.60, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the EVA Airways' past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 5.7%, a significant reduction from annual growth of 3.3% 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 30% annually for the foreseeable future. It's pretty clear that EVA Airways' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest low-light for us was that the forecasts for EVA Airways dropped from profits to a loss next year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that EVA Airways' revenues are expected to grow slower than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple EVA Airways analysts - going out to 2021, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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