It's been a good week for Minerals Technologies Inc. (NYSE:MTX) shareholders, because the company has just released its latest quarterly results, and the shares gained 7.2% to US$42.40. Revenues disappointed slightly, as sales of US$418m were 2.4% below what the analysts had predicted. Profits were a relative bright spot, with statutory per-share earnings of US$1.12 coming in 17% above what was anticipated. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Following the recent earnings report, the consensus from four analysts covering Minerals Technologies is for revenues of US$1.63b in 2020, implying a perceptible 8.0% decline in sales compared to the last 12 months. Statutory per-share earnings are expected to be US$3.79, roughly flat on the last 12 months. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.71b and earnings per share (EPS) of US$3.74 in 2020. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.
The average price target was reduced 5.6% to US$56.67, with the lower revenue forecasts indicating negative sentiment towards Minerals Technologies, even though earnings forecasts were unchanged. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Minerals Technologies analyst has a price target of US$60.00 per share, while the most pessimistic values it at US$54.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Of course, another way to look at these forecasts is to place them into context against the industry itself. Over the past five years, revenues have declined around 0.6% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 8.0% decline in revenue next year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 3.8% per year. So it's pretty clear that, while it does have declining revenues, the analysts also expect Minerals Technologies to suffer worse than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. With that said, earnings are more important to the long-term value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Minerals Technologies going out to 2024, and you can see them free on our platform here..
Even so, be aware that Minerals Technologies is showing 2 warning signs in our investment analysis , you should know about...
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