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Market forces rained on the parade of Kaiser Aluminum Corporation (NASDAQ:KALU) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
Following the downgrade, the latest consensus from Kaiser Aluminum's twin analysts is for revenues of US$1.3b in 2021, which would reflect a solid 9.9% improvement in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing US$1.7b of revenue in 2021. The consensus view seems to have become more pessimistic on Kaiser Aluminum, noting the pretty serious reduction to revenue estimates in this update.
Additionally, the consensus price target for Kaiser Aluminum increased 7.7% to US$105, showing a clear increase in optimism from the analysts involved. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Kaiser Aluminum, with the most bullish analyst valuing it at US$120 and the most bearish at US$90.00 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Kaiser Aluminum's growth to accelerate, with the forecast 9.9% annualised growth to the end of 2021 ranking favourably alongside historical growth of 0.9% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 5.8% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Kaiser Aluminum is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. The analysts also expect revenues to grow faster than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Kaiser Aluminum going forwards.
That said, the analysts might have good reason to be negative on Kaiser Aluminum, given its declining profit margins. For more information, you can click here to discover this and the 4 other warning signs we've identified.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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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