It's been a sad week for Elementis plc (LON:ELM), who've watched their investment drop 14% to UK£0.62 in the week since the company reported its interim result. Sales of US$387m surpassed estimates by 4.2%, although statutory earnings per share missed badly, coming in 32% below expectations at US$0.079 per share. 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.
Following the recent earnings report, the consensus from ten analysts covering Elementis is for revenues of US$751.9m in 2020, implying a measurable 7.2% decline in sales compared to the last 12 months. Elementis is also expected to turn profitable, with statutory earnings of US$0.07 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$747.7m and earnings per share (EPS) of US$0.057 in 2020. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the massive increase in earnings per share expectations following these results.
The consensus price target was unchanged at US$1.22, 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. The most optimistic Elementis analyst has a price target of US$1.50 per share, while the most pessimistic values it at US$0.65. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast revenue decline of 7.2%, a significant reduction from annual growth of 5.8% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 5.2% next year. So it's pretty clear that Elementis' revenues are expected to shrink 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 Elementis' earnings potential next year. The consensus also reconfirmed their revenue estimates, suggesting that sales are performing in line with expectations. Plus, our data suggests that Elementis is expected to perform worse than 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.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Elementis going out to 2022, and you can see them free on our platform here..
It is also worth noting that we have found 2 warning signs for Elementis (1 is potentially serious!) that you need to take into consideration.
This article by Simply Wall St is general in nature. 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.
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