It's been a mediocre week for Warrior Met Coal, Inc. (NYSE:HCC) shareholders, with the stock dropping 14% to US$17.71 in the week since its latest annual results. Warrior Met Coal reported US$1.3b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$5.86 beat expectations, being 3.9% higher than what analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the four analysts covering Warrior Met Coal provided consensus estimates of US$1.07b revenue in 2020, which would reflect an uncomfortable 15% decline on its sales over the past 12 months. Statutory earnings per share are forecast to crater 40% to US$3.55 in the same period. Before this earnings report, analysts had been forecasting revenues of US$1.08b and earnings per share (EPS) of US$3.83 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$28.25, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Warrior Met Coal at US$33.00 per share, while the most bearish prices it at US$20.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 15% revenue decline a notable change from historical growth of 26% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 4.1% annually for the foreseeable future. It's pretty clear that Warrior Met Coal's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$28.25, with the latest estimates not enough to have an impact on analysts' estimated valuations.
With that in mind, we wouldn't be too quick to come to a conclusion on Warrior Met Coal. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Warrior Met Coal going out to 2023, and you can see them free on our platform here..
You can also see whether Warrior Met Coal is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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