The latest analyst coverage could presage a bad day for Muehlhan AG (ETR:M4N), with the covering analyst making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the latest downgrade, the single analyst covering Muehlhan provided consensus estimates of €236m revenue in 2020, which would reflect a concerning 20% decline on its sales over the past 12 months. Following this this downgrade, earnings are now expected to tip over into loss-making territory, with the analyst forecasting losses of €0.22 per share in 2020. Before this latest update, the analyst had been forecasting revenues of €291m and earnings per share (EPS) of €0.29 in 2020. There looks to have been a major change in sentiment regarding Muehlhan's prospects, with a measurable cut to revenues and the analyst now forecasting a loss instead of a profit.
The consensus price target fell 15% to €3.65, with the analyst clearly concerned about the company following the weaker revenue and earnings outlook.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with the forecast 20% revenue decline a notable change from historical growth of 5.1% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 1.4% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Muehlhan is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analyst is expecting Muehlhan to become unprofitable this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Muehlhan.
That said, the covering analyst might have good reason to be negative on Muehlhan, given a weak balance sheet. Learn more, and discover the 4 other concerns we've identified, for free on our platform here.
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