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Last week, you might have seen that GrafTech International Ltd. (NYSE:EAF) released its quarterly result to the market. The early response was not positive, with shares down 2.7% to US$6.57 in the past week. It was a pretty mixed result, with revenues beating expectations to hit US$287m. Statutory earnings fell 2.9% short of analyst forecasts, reaching US$0.35 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the four analysts covering GrafTech International provided consensus estimates of US$1.25b revenue in 2021, which would reflect a small 3.7% decline on its sales over the past 12 months. Per-share earnings are expected to increase 2.5% to US$1.78. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.37b and earnings per share (EPS) of US$1.89 in 2021. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.
The analysts made no major changes to their price target of US$8.90, suggesting the downgrades are not expected to have a long-term impact on GrafTech International'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 GrafTech International at US$13.00 per share, while the most bearish prices it at US$7.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
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. We would highlight that sales are expected to reverse, with the forecast 3.7% revenue decline a notable change from historical growth of 30% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.4% annually for the foreseeable future. It's pretty clear that GrafTech International's revenues are expected to perform substantially worse than 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.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for GrafTech International going out to 2022, and you can see them free on our platform here.
Before you take the next step you should know about the 2 warning signs for GrafTech International that we have uncovered.
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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