Last week, you might have seen that Sumitomo Electric Industries, Ltd. (TSE:5802) released its half-yearly result to the market. The early response was not positive, with shares down 9.1% to JP¥1,663 in the past week. Revenues were JP¥2.8t, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of JP¥29.80 were also better than expected, beating analyst predictions by 15%. Following the result, the 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for Sumitomo Electric Industries from eleven analysts is for revenues of JP¥5.69t in 2027. If met, it would imply an okay 3.4% increase on its revenue over the past 12 months. Statutory earnings per share are expected to sink 16% to JP¥116 in the same period. In the lead-up to this report, the analysts had been modelling revenues of JP¥5.52t and earnings per share (EPS) of JP¥116 in 2027. So it looks like there's been no major change in sentiment following the latest results, although the analysts have made a modest lift to to revenue forecasts.
View our latest analysis for Sumitomo Electric Industries
It may not be a surprise to see thatthe analysts have reconfirmed their price target of JP¥3,212, implying that the uplift in revenue is not expected to greatly contribute to Sumitomo Electric Industries's valuation in the near term. 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. Currently, the most bullish analyst values Sumitomo Electric Industries at JP¥5,300 per share, while the most bearish prices it at JP¥2,500. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Sumitomo Electric Industries' revenue growth will slow down substantially, with revenues to the end of 2027 expected to display 7.0% growth on an annualised basis. This is compared to a historical growth rate of 9.7% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.2% annually. Even after the forecast slowdown in growth, it seems obvious that Sumitomo Electric Industries is also expected to grow faster than the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target held steady at JP¥3,212, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Sumitomo Electric Industries analysts - going out to 2029, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 2 warning signs for Sumitomo Electric Industries (1 can't be ignored!) that you need to be mindful of.
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