Today is shaping up negative for Hainan Meilan International Airport Company Limited (HKG:357) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the downgrade, the latest consensus from Hainan Meilan International Airport's seven analysts is for revenues of CN¥1.5b in 2022, which would reflect a solid 8.9% improvement in sales compared to the last 12 months. Statutory earnings per share are supposed to plummet 78% to CN¥0.19 in the same period. Before this latest update, the analysts had been forecasting revenues of CN¥1.6b and earnings per share (EPS) of CN¥0.43 in 2022. Indeed, we can see that the analysts are a lot more bearish about Hainan Meilan International Airport's prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.

View our latest analysis for Hainan Meilan International Airport

Despite the cuts to forecast earnings, there was no real change to the CN¥23.04 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Hainan Meilan International Airport, with the most bullish analyst valuing it at CN¥29.83 and the most bearish at CN¥23.99 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Hainan Meilan International Airport is an easy business to forecast or the underlying assumptions are obvious.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Hainan Meilan International Airport is forecast to grow faster in the future than it has in the past, with revenues expected to display 8.9% annualised growth until the end of 2022. If achieved, this would be a much better result than the 0.4% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 10% per year. So while Hainan Meilan International Airport's revenues are expected to improve, it seems that it is expected to grow at about the same rate as the overall industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Hainan Meilan International Airport after the downgrade.

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 Hainan Meilan International Airport analysts - going out to 2024, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.