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What Should We Expect From Iluka Resources Limited's (ASX:ILU) Earnings Over The Next Year?

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In December 2018, Iluka Resources Limited (ASX:ILU) released its earnings update. Generally, analysts seem fairly confident, with profits predicted to increase by 31% next year against the past 5-year average growth rate of 2.6%. With trailing-twelve-month net income at current levels of AU$304m, we should see this rise to AU$397m in 2020. Below is a brief commentary around Iluka Resources's earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

See our latest analysis for Iluka Resources

How will Iluka Resources perform in the near future?

The 9 analysts covering ILU view its longer term outlook with a negative sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of ILU's earnings growth over these next few years.

ASX:ILU Past and Future Earnings, July 16th 2019
ASX:ILU Past and Future Earnings, July 16th 2019

From the current net income level of AU$304m and the final forecast of AU$340m by 2022, the annual rate of growth for ILU’s earnings is -2.1%. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of A$0.81 in the final year of forecast compared to the current A$0.72 EPS today. The main reason for ILU’s earnings contraction is cost growth exceeding top-line growth of 3.1% in the next three years. However, by the end of 2022, analysts are expecting earnings to outpace revenue, and margins to expand from the current 22% to 23%.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Iluka Resources, I've compiled three essential aspects you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

  2. Valuation: What is Iluka Resources worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Iluka Resources is currently mispriced by the market.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Iluka Resources? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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.

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. Thank you for reading.