Earnings Report: United Overseas Bank Limited Missed Revenue Estimates By 5.0%

Last week, you might have seen that United Overseas Bank Limited (SGX:U11) released its annual result to the market. The early response was not positive, with shares down 2.2% to S$25.68 in the past week. Revenues came in 5.0% below expectations, at S$9.6b. Statutory earnings per share were relatively better off, with a per-share profit of S$2.54 being roughly in line with analyst estimates. 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. 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 United Overseas Bank

Following the latest results, United Overseas Bank's 15 analysts are now forecasting revenues of S$10.2b in 2020. This would be a satisfactory 5.9% improvement in sales compared to the last 12 months. Statutory per share are forecast to be S$2.51, approximately in line with the last 12 months. In the lead-up to this report, analysts had been modelling revenues of S$10.4b and earnings per share (EPS) of S$2.55 in 2020. So it looks like analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is expected to maintain EPS.

The consensus has reconfirmed its price target of S$28.05, showing that analysts don't expect weaker sales expectations next year to have a material impact on United Overseas Bank's market value. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values United Overseas Bank at S$30.50 per share, while the most bearish prices it at S$25.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.

In addition, we can look to United Overseas Bank's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. We can infer from the latest estimates that analysts are expecting a continuation of United Overseas Bank's historical trends, as next year's forecast 5.9% revenue growth is roughly in line with 6.5% annual revenue 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 8.2% per year. So it's pretty clear that United Overseas Bank is expected to grow slower than similar companies in the same market.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. Still, earnings 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.

With that in mind, we wouldn't be too quick to come to a conclusion on United Overseas Bank. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for United Overseas Bank going out to 2022, and you can see them free on our platform here..

You can also see our analysis of United Overseas Bank's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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.

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