ADVA Optical Networking SE Earnings Missed Analyst Estimates: Here's What Analysts Are Forecasting Now

It's been a mediocre week for ADVA Optical Networking SE (ETR:ADV) shareholders, with the stock dropping 14% to €7.03 in the week since its latest yearly results. It was not a great result overall. While revenues of €557m were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 16% to hit €0.14 per share. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.

See our latest analysis for ADVA Optical Networking

Taking into account the latest results, the current consensus from ADVA Optical Networking's four analysts is for revenues of €591.3m in 2020, which would reflect a satisfactory 6.2% increase on its sales over the past 12 months. Statutory earnings per share are expected to bounce 94% to €0.27. In the lead-up to this report, analysts had been modelling revenues of €590.0m and earnings per share (EPS) of €0.35 in 2020. So there's definitely been a decline in analyst sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at €9.06, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic ADVA Optical Networking analyst has a price target of €11.00 per share, while the most pessimistic values it at €7.50. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. Next year brings more of the same, according to analysts, with revenue forecast to grow 6.2%, in line with its 5.8% annual growth 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 revenues grow 3.1% per year. So although ADVA Optical Networking is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider market.

The Bottom Line

The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for ADVA Optical Networking. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that ADVA Optical Networking's revenues are expected to grow faster than the wider market. 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.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for ADVA Optical Networking going out to 2024, and you can see them free on our platform here..

You can also view our analysis of ADVA Optical Networking's balance sheet, and whether we think ADVA Optical Networking is carrying too much debt, for free on our platform here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.