Orient Overseas (International) Limited (HKG:316) just released its latest yearly report and things are not looking great. Results showed a clear earnings miss, with US$8.3b revenue coming in 3.3% lower than what the analystsexpected. Statutory earnings per share (EPS) of US$2.07 missed the mark badly, arriving some 25% below what was expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Orient Overseas (International) after the latest results.
Following the recent earnings report, the consensus from six analysts covering Orient Overseas (International) is for revenues of US$7.12b in 2024. This implies an uneasy 15% decline in revenue compared to the last 12 months. Statutory earnings per share are predicted to grow 15% to US$2.39. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$8.02b and earnings per share (EPS) of US$1.95 in 2024. So there's been quite a change-up of views after the latest results, with the analysts making a serious cut to their revenue forecasts while also granting a considerable lift to to the earnings per share numbers.
There's been no real change to the average price target of HK$108, with the lower revenue and higher earnings forecasts not expected to meaningfully impact the company's valuation over a longer timeframe. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Orient Overseas (International), with the most bullish analyst valuing it at HK$165 and the most bearish at HK$75.00 per share. 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.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that revenue is expected to reverse, with a forecast 15% annualised decline to the end of 2024. That is a notable change from historical growth of 19% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 2.2% per year. So it's pretty clear that Orient Overseas (International)'s revenues are expected to shrink faster than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Orient Overseas (International)'s earnings potential next year. Unfortunately they also downgraded their revenue estimates, and our analysts estimates suggest that Orient Overseas (International) is still expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Orient Overseas (International) analysts - going out to 2026, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 3 warning signs for Orient Overseas (International) (of which 1 is potentially serious!) you should know about.
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