Investors in Air New Zealand Limited (NZSE:AIR) had a good week, as its shares rose 4.6% to close at NZ$1.59 following the release of its half-yearly results. Sales greatly exceeded expectations, with revenues of NZ$1.2b some 27% ahead of analyst forecasts. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the recent earnings report, the consensus from six analysts covering Air New Zealand is for revenues of NZ$2.52b in 2021, implying a chunky 17% decline in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 79% to NZ$0.11. Yet prior to the latest earnings, the analysts had been forecasting revenues of NZ$2.56b and losses of NZ$0.16 per share in 2021. While the revenue estimates were largely unchanged, sentiment seems to have improved, with the analysts upgrading revenues and making a considerable decrease in losses per share in particular.
The average price target held steady at NZ$1.39, seeming to indicate that business is performing in line with expectations. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Air New Zealand, with the most bullish analyst valuing it at NZ$2.00 and the most bearish at NZ$0.65 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.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. One more thing stood out to us about these estimates, and it's the idea that Air New Zealand'sdecline is expected to accelerate, with revenues forecast to fall 17% next year, topping off a historical decline of 2.2% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 29% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Air New Zealand to suffer worse than the wider industry.
The Bottom Line
The most obvious conclusion is that the analysts made no changes to their forecasts for a loss next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Air New Zealand's revenues are expected to perform worse 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 said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Air New Zealand analysts - going out to 2025, and you can see them free on our platform here.
Before you take the next step you should know about the 1 warning sign for Air New Zealand that we have uncovered.
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. 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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