The analysts covering COSCO SHIPPING Energy Transportation Co., Ltd. (HKG:1138) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
Following the latest downgrade, the four analysts covering COSCO SHIPPING Energy Transportation provided consensus estimates of CN¥14b revenue in 2021, which would reflect a definite 12% decline on its sales over the past 12 months. Statutory earnings per share are anticipated to plummet 69% to CN¥0.16 in the same period. Prior to this update, the analysts had been forecasting revenues of CN¥17b and earnings per share (EPS) of CN¥0.47 in 2021. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.
Despite the cuts to forecast earnings, there was no real change to the CN¥4.35 price target, showing that the analysts don’t think the changes have a meaningful impact on its intrinsic value. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. The most optimistic COSCO SHIPPING Energy Transportation analyst has a price target of CN¥8.05 per share, while the most pessimistic values it at CN¥4.04. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 12% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 0.1% 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 5.2% per year. It’s pretty clear that COSCO SHIPPING Energy Transportation’s revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for COSCO SHIPPING Energy Transportation. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. We’re also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn’t blame investors for being more cautious on COSCO SHIPPING Energy Transportation after the downgrade.
A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. See why we’re concerned about COSCO SHIPPING Energy Transportation’s balance sheet by visiting our risks dashboard for free on our platform here.
We also provide an overview of the COSCO SHIPPING Energy Transportation Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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