The investors in The a2 Milk Company Limited's (NZSE:ATM) will be rubbing their hands together with glee today, after the share price leapt 26% to NZ$8.12 in the week following its half-yearly results. Results were roughly in line with estimates, with revenues of NZ$893m and statutory earnings per share of NZ$0.23. 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. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for a2 Milk

Following the latest results, a2 Milk's 15 analysts are now forecasting revenues of NZ$1.88b in 2025. This would be an okay 6.9% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to step up 12% to NZ$0.27. Before this earnings report, the analysts had been forecasting revenues of NZ$1.80b and earnings per share (EPS) of NZ$0.25 in 2025. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.

With these upgrades, we're not surprised to see that the analysts have lifted their price target 9.3% to NZ$7.51per share. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic a2 Milk analyst has a price target of NZ$8.68 per share, while the most pessimistic values it at NZ$6.50. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting a2 Milk is an easy business to forecast or the the analysts are all using similar assumptions.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting a2 Milk's growth to accelerate, with the forecast 14% annualised growth to the end of 2025 ranking favourably alongside historical growth of 2.6% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.1% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect a2 Milk to grow faster than 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 a2 Milk's earnings potential next year. Happily, they also upgraded their revenue estimates, and are forecasting them to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

With that in mind, we wouldn't be too quick to come to a conclusion on a2 Milk. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple a2 Milk analysts - going out to 2027, and you can see them free on our platform here.

You still need to take note of risks, for example - a2 Milk has 1 warning sign we think you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.