Kawasaki Heavy Industries, Ltd. (TSE:7012) shareholders are probably feeling a little disappointed, since its shares fell 7.3% to JP¥1,814 in the week after its latest half-yearly results. It looks like a pretty bad result, all things considered. Although revenues of JP¥1.1t were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 31% to hit JP¥17.44 per share. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Kawasaki Heavy Industries after the latest results.
After the latest results, the 14 analysts covering Kawasaki Heavy Industries are now predicting revenues of JP¥2.58t in 2027. If met, this would reflect a reasonable 7.5% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to increase 3.1% to JP¥138. Yet prior to the latest earnings, the analysts had been anticipated revenues of JP¥2.57t and earnings per share (EPS) of JP¥142 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.
View our latest analysis for Kawasaki Heavy Industries
It might be a surprise to learn that the consensus price target was broadly unchanged at JP¥3,471, 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 Kawasaki Heavy Industries at JP¥4,900 per share, while the most bearish prices it at JP¥2,400. 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. The analysts are definitely expecting Kawasaki Heavy Industries' growth to accelerate, with the forecast 16% annualised growth to the end of 2027 ranking favourably alongside historical growth of 10% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.7% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Kawasaki Heavy Industries is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting that it's tracking in line with expectations. Additionally, our data suggests that revenue is expected to grow faster than the wider industry. The consensus price target held steady at JP¥3,471, 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 Kawasaki Heavy Industries. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Kawasaki Heavy Industries analysts - going out to 2029, and you can see them free on our platform here.
Before you take the next step you should know about the 2 warning signs for Kawasaki Heavy Industries (1 is potentially serious!) that we have uncovered.
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