Last week saw the newest full-year earnings release from Mineral Resources Limited (ASX:MIN), an important milestone in the company's journey to build a stronger business. Statutory earnings per share fell badly short of expectations, coming in at AU$1.85, some 26% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at AU$3.4b. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. 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, the consensus forecast from Mineral Resources' nine analysts is for revenues of AU$6.26b in 2023, which would reflect a huge 83% improvement in sales compared to the last 12 months. Per-share earnings are expected to soar 387% to AU$10.32. Before this earnings report, the analysts had been forecasting revenues of AU$7.33b and earnings per share (EPS) of AU$12.26 in 2023. Indeed, we can see that the analysts are a lot more bearish about Mineral Resources' prospects following the latest results, administering a real cut to revenue estimates and slashing their EPS estimates to boot.
What's most unexpected is that the consensus price target rose 8.9% to AU$77.71, strongly implying the downgrade to forecasts is not expected to be more than a temporary blip. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Mineral Resources analyst has a price target of AU$100.00 per share, while the most pessimistic values it at AU$64.80. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Mineral Resources shareholders.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Mineral Resources' growth to accelerate, with the forecast 83% annualised growth to the end of 2023 ranking favourably alongside historical growth of 23% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 0.3% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Mineral Resources is expected to grow much faster than its 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. They also downgraded their revenue estimates, although industry data suggests that Mineral Resources' revenues are expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
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 Mineral Resources analysts - going out to 2025, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for Mineral Resources (1 makes us a bit uncomfortable!) that you should be aware of.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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