Analysts appraise corporate earnings projections
TOKYO -- The spread between company projections and analyst forecasts is important for assessing corporate earnings. If analyst forecasts far exceed company projections, it is likely that the company's earnings will be revised upward. Conversely, a downward spread shows concern that the company's earnings may fall short of its projections.
QUICK ranked major Japanese companies whose projected pretax profits for the fiscal year ending March 2017 exceed 10 billion yen ($89.9 million), excluding financial companies, utilities and startups.
For engineering company Chiyoda Corp., the QUICK consensus survey was more than twice the company's projections. The company predicts its group pretax profit to fall 14% on the year to 14 billion yen for the current fiscal year, due to declining demand for resource development projects resulting from the slump in crude oil prices.
Meanwhile, analysts are focusing on Chiyoda's abundant back orders. The company's pretax profit is forecast to double from a year earlier, in view of an increase in additional construction work.
Analyst and company projections are divided on shipping company Nippon Yusen, which ranks third. The company projects a conservative recovery in the shipping market, while analysts appear to believe the company is less immune to market fluctuations than its competitors.
Pretax profit at fifth-ranked Tokyo Gas could be revised upward depending on the success of new businesses. The company forecasts its pretax profit to tumble 80% on the year to 40 billion yen for the current fiscal year, due to the reduction of gas charges resulting from falling prices of liquefied natural gas.
However, expectations are growing that the company's profits will increase, because it is likely receiving many applications from customers switching over from Tokyo Electric Power Company Holdings after Japan's retail power market was liberalized on April 1.
On the other side, Japan Aviation Electronics Industry, a manufacturer of electronic equipment and components, is ranked first in terms of analyst forecasts falling below company projections. Although the company predicts pretax profit will increase, analysts expect a 10% decline due to the slump in components for high-end smartphones.
Analysts are taking a grim view of pump-maker Ebara Corp.. With the company's projected exchange rate at 105 yen against the dollar, however, pretax profit could exceed analyst forecasts depending on foreign exchange movements.