Lenovo Group Limited Just Recorded A 10% EPS Beat: Here's What Analysts Are Forecasting Next
Lenovo Group Limited (HKG:992) investors will be delighted, with the company turning in some strong numbers with its latest results. Lenovo Group beat earnings, with revenues hitting US$14b, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 10%. Following the result, 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've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
View our latest analysis for Lenovo Group
Taking into account the latest results, Lenovo Group's 16 analysts currently expect revenues in 2021 to be US$52.6b, approximately in line with the last 12 months. Statutory earnings per share are expected to increase 6.1% to US$0.066. In the lead-up to this report, analysts had been modelling revenues of US$53.7b and earnings per share (EPS) of US$0.067 in 2021. Analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.
Analysts made no major changes to their price target of US$0.93, suggesting the downgrades are not expected to have a long-term impact on Lenovo Group's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Lenovo Group, with the most bullish analyst valuing it at US$2.70 and the most bearish at US$0.60 per share. With such a wide range in price targets, analysts are almost certainly baking in outcomes as diverse as total success and probable failure in the underlying business. With this in mind, we wouldn't assign too much meaning to the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Lenovo Group's past performance and to peers in the same market. We would highlight that Lenovo Group's revenue growth is expected to slow, with forecast 1.4% increase next year well below the historical 2.7%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 12% next year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Lenovo Group.
The Bottom Line
The most important thing to take away is that 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 market. 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. At Simply Wall St, we have a full range of analyst estimates for Lenovo Group going out to 2022, and you can see them free on our platform here..
You can also see whether Lenovo Group is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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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