Kobe Steel, Ltd. (TSE:5406) just released its latest interim report and things are not looking great. Kobe Steel missed earnings this time around, with JP¥1.3t revenue coming in 3.0% below what the analysts had modelled. Statutory earnings per share (EPS) of JP¥76.68 also fell short of expectations by 10%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. 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 current consensus from Kobe Steel's seven analysts is for revenues of JP¥2.67t in 2027. This would reflect a reasonable 6.1% increase on its revenue over the past 12 months. Per-share earnings are expected to shoot up 35% to JP¥249. Before this earnings report, the analysts had been forecasting revenues of JP¥2.69t and earnings per share (EPS) of JP¥256 in 2027. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
See our latest analysis for Kobe Steel
It might be a surprise to learn that the consensus price target was broadly unchanged at JP¥2,113, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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 Kobe Steel at JP¥2,500 per share, while the most bearish prices it at JP¥1,750. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
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. The analysts are definitely expecting Kobe Steel's growth to accelerate, with the forecast 13% annualised growth to the end of 2027 ranking favourably alongside historical growth of 3.8% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 3.8% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Kobe Steel is expected to grow much faster than its industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Kobe Steel. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at JP¥2,113, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Kobe Steel. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Kobe Steel going out to 2029, and you can see them free on our platform here..
It is also worth noting that we have found 3 warning signs for Kobe Steel (1 shouldn't be ignored!) that you need to take into consideration.
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