ZTE Corporation (SZSE:000063) came out with its annual results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. It looks like the results were a bit of a negative overall. While revenues of CN¥124b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 3.9% to hit CN¥1.96 per share. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
Taking into account the latest results, the current consensus from ZTE's 17 analysts is for revenues of CN¥130.7b in 2024. This would reflect a satisfactory 5.2% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to grow 13% to CN¥2.20. Before this earnings report, the analysts had been forecasting revenues of CN¥134.2b and earnings per share (EPS) of CN¥2.29 in 2024. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the small dip in earnings per share expectations.
Despite the cuts to forecast earnings, there was no real change to the CN¥34.35 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. 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. The most optimistic ZTE analyst has a price target of CN¥53.43 per share, while the most pessimistic values it at CN¥16.51. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the ZTE's past performance and to peers in the same industry. It's pretty clear that there is an expectation that ZTE's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 5.2% growth on an annualised basis. This is compared to a historical growth rate of 8.7% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 24% annually. Factoring in the forecast slowdown in growth, it seems obvious that ZTE is also expected to grow slower than other industry participants.
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. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. The consensus price target held steady at CN¥34.35, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for ZTE going out to 2026, and you can see them free on our platform here..
However, before you get too enthused, we've discovered 1 warning sign for ZTE that you should be aware of.
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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.