Yahoo Finance These Analysts Just Made A Substantial Downgrade To Their The a2 Milk Company Limited (NZSE:ATM) EPS Forecasts
Today is shaping up negative for The a2 Milk Company Limited (NZSE:ATM) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.
Following the downgrade, the consensus from 13 analysts covering a2 Milk is for revenues of NZ$1.6b in 2021, implying a definite 10% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to tumble 24% to NZ$0.40 in the same period. Before this latest update, the analysts had been forecasting revenues of NZ$1.8b and earnings per share (EPS) of NZ$0.53 in 2021. Indeed, we can see that the analysts are a lot more bearish about a2 Milk's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
View our latest analysis for a2 Milk
It'll come as no surprise then, to learn that the analysts have cut their price target 15% to NZ$15.22. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic a2 Milk analyst has a price target of NZ$21.00 per share, while the most pessimistic values it at NZ$9.50. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the 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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 10%, a significant reduction from annual growth of 39% 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 7.6% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - a2 Milk is expected to lag 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 a2 Milk. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of a2 Milk.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for a2 Milk going out to 2024, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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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