Yahoo Finance Analysts Just Slashed Their The a2 Milk Company Limited (NZSE:ATM) EPS Numbers
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 14 analysts covering a2 Milk is for revenues of NZ$1.2b in 2021, implying a concerning 23% decline in sales compared to the last 12 months. Statutory earnings per share are anticipated to plunge 70% to NZ$0.13 in the same period. Previously, the analysts had been modelling revenues of NZ$1.4b and earnings per share (EPS) of NZ$0.32 in 2021. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a pretty serious decline to earnings per share numbers as well.
Check out our latest analysis for a2 Milk
The consensus price target fell 27% to NZ$8.01, with the weaker earnings outlook clearly leading analyst valuation estimates. 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. There are some variant perceptions on a2 Milk, with the most bullish analyst valuing it at NZ$13.50 and the most bearish at NZ$4.90 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the a2 Milk's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 41% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 34% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 10.0% annually for the foreseeable future. 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. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
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 2025, 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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