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Croda International Plc Earnings Missed Analyst Estimates: Here's What Analysts Are Forecasting Now

Simply Wall St

Last week, you might have seen that Croda International Plc (LON:CRDA) released its annual result to the market. The early response was not positive, with shares down 7.8% to UK£47.82 in the past week. It looks like the results were a bit of a negative overall. While revenues of UK£1.4b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 7.0% to hit UK£1.72 per share. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Croda International after the latest results.

See our latest analysis for Croda International

LSE:CRDA Past and Future Earnings, February 27th 2020

Following last week's earnings report, Croda International's 14 analysts are forecasting 2020 revenues to be UK£1.37b, approximately in line with the last 12 months. Statutory earnings per share are expected to increase 8.9% to UK£1.88. In the lead-up to this report, analysts had been modelling revenues of UK£1.42b and earnings per share (EPS) of UK£1.95 in 2020. It's pretty clear that analyst sentiment has fallen after the latest results, leading to lower revenue forecasts and a small dip in earnings per share estimates.

Analysts made no major changes to their price target of UK£49.04, suggesting the downgrades are not expected to have a long-term impact on Croda International's valuation. 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 Croda International, with the most bullish analyst valuing it at UK£55.50 and the most bearish at UK£41.00 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.

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 0.6% a significant reduction from annual growth of 6.7% 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 2.5% 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 Croda International to grow slower 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 negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. 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.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Croda International going out to 2024, and you can see them free on our platform here.

You can also see whether Croda International 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.