Century Aluminum Company Just Released Its Yearly Earnings: Here's What Analysts Think
Shareholders of Century Aluminum Company (NASDAQ:CENX) will be pleased this week, given that the stock price is up 13% to US$6.39 following its latest annual results. Century Aluminum reported revenues of US$1.8b, in line with expectations, but it unfortunately also reported (statutory) losses of US$0.91 per share, which were slightly larger than expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. 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 Century Aluminum
Taking into account the latest results, the three analysts covering Century Aluminum provided consensus estimates of US$1.78b revenue in 2020, which would reflect a measurable 3.3% decline on its sales over the past 12 months. Century Aluminum is also expected to turn profitable, with statutory earnings of US$0.31 per share. Before this earnings report, analysts had been forecasting revenues of US$1.83b and earnings per share (EPS) of US$0.78 in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a large cut to earnings per share estimates.
Analysts made no major changes to their price target of US$8.70, suggesting the downgrades are not expected to have a long-term impact on Century Aluminum's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Century Aluminum, with the most bullish analyst valuing it at US$11.00 and the most bearish at US$6.50 per share. 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.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Century Aluminum's past performance and to peers in the same market. One obvious concern is that although revenues are forecast to continue shrinking, the expected 3.3% decline next year is substantially more severe than the 0.8% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the market are forecast to see their revenue decline 3.6% per year. It seems clear that while revenues are expected to continue declining, analysts also expect the downturn to be more severe than that of 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 Century Aluminum. 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. 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. We have estimates - from multiple Century Aluminum analysts - going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Century Aluminum's balance sheet, and whether we think Century Aluminum is carrying too much debt, 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.
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