Nine Entertainment Co. Holdings Limited Just Missed Earnings And Its EPS Looked Sad - But Analysts Have Updated Their Models
Last week, you might have seen that Nine Entertainment Co. Holdings Limited (ASX:NEC) released its interim result to the market. The early response was not positive, with shares down 3.1% to AU$1.71 in the past week. It looks like a pretty bad result, all things considered. Although revenues of AU$1.2b were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 25% to hit AU$0.05 per share. 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. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
View our latest analysis for Nine Entertainment Holdings
Taking into account the latest results, Nine Entertainment Holdings's nine analysts currently expect revenues in 2020 to be AU$2.33b, approximately in line with the last 12 months. Statutory earnings per share are expected to leap 22% to AU$0.11. In the lead-up to this report, analysts had been modelling revenues of AU$2.36b and earnings per share (EPS) of AU$0.12 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a real cut to EPS estimates.
The consensus price target held steady at AU$2.16, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Nine Entertainment Holdings, with the most bullish analyst valuing it at AU$2.50 and the most bearish at AU$1.90 per share. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Nine Entertainment Holdings's past performance and to peers in the same market. We would highlight that sales are expected to reverse, with the forecast 0.4% revenue decline a notable change from historical growth of 10% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 3.1% annually for the foreseeable future. It's pretty clear that Nine Entertainment Holdings's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Nine Entertainment Holdings. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at AU$2.16, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Nine Entertainment Holdings. Long-term earnings power is much more important than next year's profits. We have forecasts for Nine Entertainment Holdings going out to 2023, and you can see them free on our platform here.
You can also see whether Nine Entertainment Holdings 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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