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Analysts Have Been Trimming Their K+S Aktiengesellschaft Price Target After Its Latest Report

Simply Wall St

There's been a notable change in appetite for K+S Aktiengesellschaft (ETR:SDF) shares in the week since its yearly report, with the stock down 17% to €5.28. Revenues of €4.1b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at €0.46, missing estimates by 4.2%. 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 gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.

Check out our latest analysis for K+S

XTRA:SDF Past and Future Earnings, March 15th 2020

Taking into account the latest results, K+S's 20 analysts currently expect revenues in 2020 to be €4.07b, approximately in line with the last 12 months. Statutory earnings per share are expected to dive 47% to €0.25 in the same period. Before this earnings report, analysts had been forecasting revenues of €4.22b and earnings per share (EPS) of €0.68 in 2020. Analysts seem less optimistic after the recent results, reducing their sales forecasts and making a pretty serious reduction to earnings per share forecasts.

The consensus price target fell 14% to €9.62, with the weaker earnings outlook clearly leading analyst valuation estimates. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on K+S, with the most bullish analyst valuing it at €24.15 and the most bearish at €3.00 per share. With such a wide range in price targets, analysts are almost certainly baking in outcomes as diverse as total success and probable failure in the underlying business. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

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 0.06% a significant reduction from annual growth of 0.6% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 3.9% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect K+S to grow slower than the wider market.

The Bottom Line

The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for K+S. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of K+S's future valuation.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple K+S analysts - going out to 2024, and you can see them free on our platform here.

You can also see whether K+S is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.