Earnings Miss: China Taiping Insurance Holdings Company Limited Missed EPS By 9.4% And Analysts Are Revising Their Forecasts

Investors in China Taiping Insurance Holdings Company Limited (HKG:966) had a good week, as its shares rose 7.8% to close at HK$12.38 following the release of its annual results. It was a pretty mixed result, with revenues beating expectations to hit HK$245b. Statutory earnings fell 9.4% short of analyst forecasts, reaching HK$2.46 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on China Taiping Insurance Holdings after the latest results.

Check out our latest analysis for China Taiping Insurance Holdings

Taking into account the latest results, the consensus forecast from China Taiping Insurance Holdings's twelve analysts is for revenues of HK$265.5b in 2020, which would reflect a meaningful 8.6% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to dive 25% to HK$1.83 in the same period. In the lead-up to this report, the analysts had been modelling revenues of HK$261.8b and earnings per share (EPS) of HK$2.65 in 2020. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.

The average price target fell 11% to HK$20.30, with reduced earnings forecasts clearly tied to a lower valuation estimate. 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 China Taiping Insurance Holdings, with the most bullish analyst valuing it at HK$29.50 and the most bearish at HK$14.90 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying 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. It's pretty clear that there is an expectation that China Taiping Insurance Holdings's revenue growth will slow down substantially, with revenues next year expected to grow 8.6%, compared to a historical growth rate of 14% 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 shrink 2.0% per year. So it's clear that despite the slowdown in growth, China Taiping Insurance Holdings is still expected to grow meaningfully faster than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for China Taiping Insurance Holdings. On the plus side, they made no changes to their revenue estimates - and they expect sales to perform better than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

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. At Simply Wall St, we have a full range of analyst estimates for China Taiping Insurance Holdings going out to 2021, and you can see them free on our platform here..

Plus, you should also learn about the 2 warning signs we've spotted with China Taiping Insurance Holdings .

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.