Shareholders might have noticed that Lenovo Group Limited (HKG:992) filed its first-quarter result this time last week. The early response was not positive, with shares down 3.4% to HK$9.68 in the past week. It was a workmanlike result, with revenues of US$15b coming in 9.5% ahead of expectations, and statutory earnings per share of US$0.019, in line with analyst appraisals. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus from Lenovo Group's 23 analysts is for revenues of US$63.7b in 2025. This would reflect an okay 7.2% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to ascend 17% to US$0.10. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$62.0b and earnings per share (EPS) of US$0.11 in 2025. So it's pretty clear consensus is mixed on Lenovo Group after the latest results; whilethe analysts lifted revenue numbers, they also administered a small dip in per-share earnings expectations.
There's been no major changes to the price target of HK$12.27, suggesting that the impact of higher forecast revenue and lower earnings won't result in a meaningful change to the business' 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 Lenovo Group analyst has a price target of HK$13.98 per share, while the most pessimistic values it at HK$10.68. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
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 clear from the latest estimates that Lenovo Group's rate of growth is expected to accelerate meaningfully, with the forecast 9.7% annualised revenue growth to the end of 2025 noticeably faster than its historical growth of 3.1% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 12% annually. It seems obvious that, while the future growth outlook is brighter than the recent past, Lenovo Group is expected to grow slower 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 Lenovo Group. They also upgraded their revenue estimates for next year, even though it is expected to grow slower than the wider industry. 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 Lenovo Group. Long-term earnings power is much more important than next year's profits. We have forecasts for Lenovo Group going out to 2027, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 1 warning sign for Lenovo Group you should know about.
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