Incitec Pivot Limited (ASX:IPL) last week reported its latest full-year results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Statutory earnings per share fell badly short of expectations, coming in at AU$0.071, some 36% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at AU$4.0b. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, Incitec Pivot's eleven analysts currently expect revenues in 2021 to be AU$3.94b, approximately in line with the last 12 months. Statutory earnings per share are predicted to bounce 62% to AU$0.12. Yet prior to the latest earnings, the analysts had been anticipated revenues of AU$4.05b and earnings per share (EPS) of AU$0.14 in 2021. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a real cut to earnings per share numbers.
The analysts made no major changes to their price target of AU$2.47, suggesting the downgrades are not expected to have a long-term impact on Incitec Pivot's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Incitec Pivot at AU$3.00 per share, while the most bearish prices it at AU$2.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
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. We would highlight that sales are expected to reverse, with the forecast 1.0% revenue decline a notable change from historical growth of 3.4% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 6.6% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Incitec Pivot is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. 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 forecasts for Incitec Pivot going out to 2025, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 2 warning signs for Incitec Pivot that you need to be mindful of.
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.
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