Results: NEC Corporation Exceeded Expectations And The Consensus Has Updated Its Estimates

It's been a mediocre week for NEC Corporation (TSE:6701) shareholders, with the stock dropping 10% to JP¥4,850 in the week since its latest interim results. It looks like a credible result overall - although revenues of JP¥1.8t were in line with what the analysts predicted, NEC surprised by delivering a statutory profit of JP¥87.78 per share, a notable 10% above expectations. 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.

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Following the latest results, NEC's 13 analysts are now forecasting revenues of JP¥3.88t in 2027. This would be a satisfactory 2.9% improvement in revenue compared to the last 12 months. Statutory per-share earnings are expected to be JP¥237, roughly flat on the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of JP¥3.85t and earnings per share (EPS) of JP¥231 in 2027. So the consensus seems to have become somewhat more optimistic on NEC's earnings potential following these results.

View our latest analysis for NEC

The consensus price target was unchanged at JP¥6,308, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values NEC at JP¥8,000 per share, while the most bearish prices it at JP¥5,400. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

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 NEC's rate of growth is expected to accelerate meaningfully, with the forecast 5.9% annualised revenue growth to the end of 2027 noticeably faster than its historical growth of 3.9% p.a. over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 6.4% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that NEC is expected to grow at about the same rate as the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around NEC's earnings potential next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as 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.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for NEC going out to 2029, and you can see them free on our platform here..

Even so, be aware that NEC is showing 1 warning sign in our investment analysis , you should know about...

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