It's been a good week for Luk Fook Holdings (International) Limited (HKG:590) shareholders, because the company has just released its latest half-year results, and the shares gained 6.6% to HK$21.80. Revenues came in 9.2% below expectations, at HK$6.3b. Earnings per share were relatively better off, with a per-share profit of HK$2.54 being roughly in line with analyst estimates. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest forecasts to see what analysts are expecting for next year.

Check out our latest analysis for Luk Fook Holdings (International)

Following the recent earnings report, the consensus fromeleven analysts covering Luk Fook Holdings (International) expects revenues of HK$13.3b in 2020, implying a small 7.4% decline in sales compared to the last 12 months. Earnings per share are expected to descend 14% to HK$1.94 in the same period. Before this earnings report, analysts had been forecasting revenues of HK$15.0b and earnings per share (EPS) of HK$2.25 in 2020. It looks like analyst sentiment has declined substantially in the aftermath of these results, with a substantial drop in revenue estimates and a substantial drop in consensus earnings per share numbers as well.

Despite the cuts to forecast earnings, there was no real change to the HK$23.43 price target, showing that analysts don't think the changes have a meaningful impact on the stock's intrinsic value. 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 Luk Fook Holdings (International), with the most bullish analyst valuing it at HK$27.70 and the most bearish at HK$19.00 per share. 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.

In addition, we can look to Luk Fook Holdings (International)'s past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. One thing that stands out from these estimates is that, even though revenues are forecast to keep falling, the decline is expected to accelerate. Analysts have modelled a 7.4% decline next year, compared to a historical decline of 0.6% per annum for the past five years. Compare this with our data on other companies (with analyst coverage) in a similar industry, which in aggregate are forecast to see their revenue decline 9.5% per year. So it looks like Luk Fook Holdings (International) is also expected to see its revenues decline at a faster rate than the wider market.

The Bottom Line

The biggest highlight of the new consensus is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Luk Fook Holdings (International). 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.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Luk Fook Holdings (International) going out to 2022, and you can see them free on our platform here.

You can also see our analysis of Luk Fook Holdings (International)'s Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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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