Revenue Beat: Hollysys Automation Technologies Ltd. Exceeded Revenue Forecasts By 8.4% And Analysts Are Updating Their Estimates

As you might know, Hollysys Automation Technologies Ltd. (NASDAQ:HOLI) recently reported its second-quarter numbers. It was a workmanlike result, with revenues of US$170m coming in 8.4% ahead of expectations, and statutory earnings per share of US$2.05, in line with analyst appraisals. This is an important time for investors, as they can track a company’s performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we’ve gathered the latest statutory forecasts to see what analysts are expecting for next year.

View our latest analysis for Hollysys Automation Technologies

NasdaqGS:HOLI Past and Future Earnings, February 21st 2020
NasdaqGS:HOLI Past and Future Earnings, February 21st 2020

Taking into account the latest results, the latest consensus from Hollysys Automation Technologies’s five analysts is for revenues of US$613.5m in 2020, which would reflect a credible 6.6% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to swell 15% to US$2.22. Before this earnings report, analysts had been forecasting revenues of US$633.6m and earnings per share (EPS) of US$2.26 in 2020. So it looks like analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is expected to maintain EPS.

The consensus has reconfirmed its price target of US$23.03, showing that analysts don’t expect weaker sales expectations next year to have a material impact on Hollysys Automation Technologies’s market 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. There are some variant perceptions on Hollysys Automation Technologies, with the most bullish analyst valuing it at US$28.00 and the most bearish at US$18.20 per share. 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.

It can also be useful to step back and take a broader view of how analyst forecasts compare to Hollysys Automation Technologies’s performance in recent years. It’s clear from the latest estimates that Hollysys Automation Technologies’s rate of growth is expected to accelerate meaningfully, with forecast 6.6% revenue growth noticeably faster than its historical growth of 1.5%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.2% per year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Hollysys Automation Technologies is expected to grow much faster than its market.

The Bottom Line

The most important thing to take away is that there’s been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Unfortunately analysts also downgraded their revenue estimates, although industry data suggests that Hollysys Automation Technologies’s revenues are expected to grow faster than the wider market. Yet – earnings 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.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates – from multiple Hollysys Automation Technologies analysts – going out to 2024, and you can see them free on our platform here.

You can also see our analysis of Hollysys Automation Technologies’s Board and CEO remuneration and experience, and whether company insiders have been buying stock.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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