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Earnings Update: Here's Why Analysts Just Lifted Their ChampionX Corporation (NASDAQ:CHX) Price Target To US$23.45

ChampionX Corporation (NASDAQ:CHX) investors will be delighted, with the company turning in some strong numbers with its latest results. Revenues and losses per share were both better than expected, with revenues of US$1.9b leading estimates by 3.3%. Statutory losses were smaller than the analystsexpected, coming in at US$5.01 per share. 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.

Check out our latest analysis for ChampionX

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the consensus forecast from ChampionX's nine analysts is for revenues of US$2.86b in 2021, which would reflect a substantial 50% improvement in sales compared to the last 12 months. Earnings are expected to improve, with ChampionX forecast to report a statutory profit of US$0.39 per share. Before this earnings report, the analysts had been forecasting revenues of US$2.73b and earnings per share (EPS) of US$0.33 in 2021. So it seems there's been a definite increase in optimism about ChampionX's future following the latest results, with a solid gain to the earnings per share forecasts in particular.

With these upgrades, we're not surprised to see that the analysts have lifted their price target 31% to US$23.45per share. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic ChampionX analyst has a price target of US$30.00 per share, while the most pessimistic values it at US$18.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that ChampionX's rate of growth is expected to accelerate meaningfully, with the forecast 50% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 9.6% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.5% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect ChampionX to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around ChampionX's earnings potential next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

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. We have forecasts for ChampionX going out to 2025, and you can see them free on our platform here.

You still need to take note of risks, for example - ChampionX has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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