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Market forces rained on the parade of China Merchants Port Holdings Company Limited (HKG:144) shareholders today, when the analysts downgraded their forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.
Following the latest downgrade, the current consensus, from the eight analysts covering China Merchants Port Holdings, is for revenues of HK$8.6b in 2020, which would reflect a discernible 3.8% reduction in China Merchants Port Holdings' sales over the past 12 months. Statutory earnings per share are supposed to crater 56% to HK$1.10 in the same period. Prior to this update, the analysts had been forecasting revenues of HK$9.7b and earnings per share (EPS) of HK$1.37 in 2020. Indeed, we can see that the analysts are a lot more bearish about China Merchants Port Holdings' prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.
View our latest analysis for China Merchants Port Holdings
The consensus price target fell 9.7% to HK$14.26, 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. Currently, the most bullish analyst values China Merchants Port Holdings at HK$16.00 per share, while the most bearish prices it at HK$10.08. 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.
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. We would highlight that sales are expected to reverse, with the forecast 3.8% revenue decline a notable change from historical growth of 3.8% 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 6.3% annually for the foreseeable future. It's pretty clear that China Merchants Port Holdings' revenues are expected to perform substantially worse than 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 China Merchants Port Holdings. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of China Merchants Port Holdings.