MTN Group Limited Just Missed EPS By 67%: Here's What Analysts Think Will Happen Next

Investors in MTN Group Limited (JSE:MTN) had a good week, as its shares rose 5.2% to close at R120 following the release of its half-year results. Statutory earnings per share fell badly short of expectations, coming in at R1.46, some 67% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at R87b. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on MTN Group after the latest results.

See our latest analysis for MTN Group

Taking into account the latest results, the current consensus, from the ten analysts covering MTN Group, is for revenues of R176.8b in 2021, which would reflect a measurable 2.9% reduction in MTN Group's sales over the past 12 months. Per-share earnings are expected to bounce 122% to R9.36. Before this earnings report, the analysts had been forecasting revenues of R176.3b and earnings per share (EPS) of R9.18 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

It will come as no surprise then, to learn that the consensus price target is largely unchanged at R116. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on MTN Group, with the most bullish analyst valuing it at R165 and the most bearish at R75.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 5.7% by the end of 2021. This indicates a significant reduction from annual growth of 5.8% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 7.7% per year. It's pretty clear that MTN Group's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that MTN Group's revenues are expected to perform worse than the wider industry. The consensus price target held steady at R116, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for MTN Group going out to 2023, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 2 warning signs for MTN Group 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.
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