Earnings Miss: SMS Co., Ltd. Missed EPS By 13% And Analysts Are Revising Their Forecasts
Last week saw the newest half-year earnings release from SMS Co., Ltd. (TSE:2175), an important milestone in the company's journey to build a stronger business. Revenues were in line with forecasts, at JP¥36b, although statutory earnings per share came in 13% below what the analysts expected, at JP¥5.89 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on SMS after the latest results.
Taking into account the latest results, the consensus forecast from SMS' six analysts is for revenues of JP¥70.2b in 2027. This reflects a credible 3.6% improvement in revenue compared to the last 12 months. Earnings are expected to improve, with SMS forecast to report a statutory profit of JP¥76.54 per share. Before this earnings report, the analysts had been forecasting revenues of JP¥71.2b and earnings per share (EPS) of JP¥77.48 in 2027. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
Check out our latest analysis for SMS
The analysts reconfirmed their price target of JP¥1,806, showing that the business is executing well and in line with expectations. 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 SMS analyst has a price target of JP¥2,200 per share, while the most pessimistic values it at JP¥1,500. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the SMS' past performance and to peers in the same industry. It's pretty clear that there is an expectation that SMS' revenue growth will slow down substantially, with revenues to the end of 2027 expected to display 7.4% growth on an annualised basis. This is compared to a historical growth rate of 12% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 9.1% per year. Factoring in the forecast slowdown in growth, it seems obvious that SMS is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at JP¥1,806, with the latest estimates not enough to have an impact on their price targets.
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 SMS going out to 2029, and you can see them free on our platform here..
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
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