Today is shaping up negative for Kudelski SA (VTX:KUD) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
After the downgrade, the consensus from Kudelski's three analysts is for revenues of US$597m in 2024, which would reflect a sizeable 21% decline in sales compared to the last year of performance. Losses are predicted to fall substantially, shrinking 70% to US$0.21 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$679m and losses of US$0.18 per share in 2024. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
View our latest analysis for Kudelski
Analysts lifted their price target 20% to CHF1.51, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. One more thing stood out to us about these estimates, and it's the idea that Kudelski's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 21% to the end of 2024. This tops off a historical decline of 2.5% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 10% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Kudelski to suffer worse than the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Kudelski. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.
Unfortunately, the earnings downgrade - if accurate - may also place pressure on Kudelski's mountain of debt, which could lead to some belt tightening for shareholders. You can learn more about our debt analysis for free on our platform here.