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Kerry Logistics Network Limited (HKG:636) Just Reported And Analysts Have Been Cutting Their Estimates

Investors in Kerry Logistics Network Limited (HKG:636) had a good week, as its shares rose 9.6% to close at HK$10.14 following the release of its yearly results. Results look mixed - while revenue fell marginally short of analyst estimates at HK$41b, statutory earnings were in line with expectations, at HK$2.21 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Kerry Logistics Network

SEHK:636 Past and Future Earnings April 2nd 2020
SEHK:636 Past and Future Earnings April 2nd 2020

Following last week's earnings report, Kerry Logistics Network's nine analysts are forecasting 2020 revenues to be HK$41.1b, approximately in line with the last 12 months. Statutory earnings per share are expected to plunge 59% to HK$0.90 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of HK$45.4b and earnings per share (EPS) of HK$1.17 in 2020. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a large cut to earnings per share estimates.

The consensus price target fell 8.0% to HK$12.78, with the weaker earnings outlook clearly leading valuation estimates. 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 Kerry Logistics Network analyst has a price target of HK$16.00 per share, while the most pessimistic values it at HK$9.80. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Kerry Logistics Network's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 0.2%, a significant reduction from annual growth of 17% 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 12% annually for the foreseeable future. It's pretty clear that Kerry Logistics Network's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Kerry Logistics Network going out to 2022, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 4 warning signs for Kerry Logistics Network (1 can't be ignored!) that you should be aware of.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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