Denmark-based shipping and logistics company AP Moller-Maersk A/S (MAERSKb.CO) beat earnings estimates handily when it reported second quarter results in August, and a major part of that earnings beat came from unexpected cost savings. A disciplined approach to costs is likely to continue to benefit the company in the third quarter.
There is a positive StarMine Predicted Surprise of 10.2% that indicates that I/B/E/S consensus estimates may still be too low, or that the company may beat these estimates when it reports third quarter earnings on Nov. 13.
Source: Eikon/StarMine
Estimates on the way up
As seen in the chart above, after Moller-Maersk reported Q2 earnings just last week, analysts raised their estimates and the consensus increased from DEK1,112 (Danish Krone) per share to the current level of DEK 1,282, an increase of more than 20%. The StarMine SmartEstimate is even higher at DEK1,412 which represents a 10% positive Predicted Surprise.
There is even a Bold Estimates of DEK 1,381. A Bold Estimate represents an estimate by one of StarMine’s five-star rated analysts that is significantly different from the mean. The analyst has earned a five-star rating for his accuracy in estimating earnings in the past; that is a persistent skill and the reason we pay more attention to his estimates.
The cost cutting measures have yielded good results. CEO Nils Smedegaard Andersen mentioned that the group “expect to continue or be able to continue to push costs down,” which means that measures to trim costs and increase efficiency will continue to benefit earnings. Free cash flows have improved. As seen in the chart below, after five consecutive quarters of negative free cash flows, the company has generated positive free cash flows for the last four consecutive quarters, and generated DEK4.2 billion in the second quarter.
Source: Eikon/StarMine
Top score on revisions
The company scores a 93 on the StarMine Analyst Revisions Model (ARM), which puts it in the top decile of companies in the region for analyst optimism. Analysts have increased EPS estimates for Moller-Maersk by 15% in just the past two weeks for the current quarter, but have also increased their estimates for the full year by 7% and for the next year by 5%.
The chart below summarizes analysts’ buy sell and hold recommendations. There are now 18 buy recommendations for Moller-Maersk compared to just 10 hold and sell recommendations. Compare that to 90 days ago when there were more hold and sell recommendations (15) compared to buys (13).
Source:Eikon/StarMine
Changes in analyst sentiment contribute to the high Analyst Revisions Model score.
SMARTESTIMATES AND THE PREDICTED SURPRISE %
SmartEstimates: StarMine Professional quantitatively analyzes the earnings estimate accuracy of sell-side analysts and uses this information to create proprietary
SmartEstimates®.SmartEstimates help you better predict future earnings and analyst revisions with estimates that place more weight on recent forecasts by top-rated analysts.
Predicted Surprise %: The Predicted Surprise% is the percentage difference between the SmartEstimate and the I/B/E/S consensus estimate. When SmartEstimates diverge significantly from consensus, it serves as a leading indicator of the direction of future revisions and/or surprises. In aggregate, this indicator gets earnings surprises directionally correct 70% of the time.
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