On Holding AG Just Missed EPS By 90%: Here's What Analysts Think Will Happen Next

It's been a sad week for On Holding AG (NYSE:ONON), who've watched their investment drop 14% to US$30.66 in the week since the company reported its second-quarter result. Revenue of CHF444m surpassed estimates by 6.0%, although statutory earnings per share missed badly, coming in 90% below expectations at CHF0.01 per share. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for On Holding

Taking into account the latest results, the most recent consensus for On Holding from 15 analysts is for revenues of CHF1.78b in 2023. If met, it would imply a decent 14% increase on its revenue over the past 12 months. Per-share earnings are expected to leap 200% to CHF0.40. In the lead-up to this report, the analysts had been modelling revenues of CHF1.78b and earnings per share (EPS) of CHF0.48 in 2023. So there's definitely been a decline in sentiment after the latest results, noting the substantial drop in new EPS forecasts.

The consensus price target held steady at US$35.64, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. 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. There are some variant perceptions on On Holding, with the most bullish analyst valuing it at US$47.98 and the most bearish at US$20.42 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

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 On Holding's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 31% growth on an annualised basis. This is compared to a historical growth rate of 67% over the past year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 7.5% annually. Even after the forecast slowdown in growth, it seems obvious that On Holding is also expected to grow faster than the wider 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. Happily, there were no major changes to revenue forecasts, with the business still 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.

With that in mind, we wouldn't be too quick to come to a conclusion on On Holding. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for On Holding going out to 2025, and you can see them free on our platform here..

You should always think about risks though. Case in point, we've spotted 1 warning sign for On Holding you should be aware of.

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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.