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Kaiser Aluminum Corporation (NASDAQ:KALU) defied analyst predictions to release its third-quarter results, which were ahead of market expectations. The company beat both earnings and revenue forecasts, with revenue of US$256m, some 3.7% above estimates, and statutory earnings per share (EPS) coming in at US$0.02, 100% ahead of expectations. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Kaiser Aluminum after the latest results.
Taking into account the latest results, the two analysts covering Kaiser Aluminum provided consensus estimates of US$1.23b revenue in 2021, which would reflect a not inconsiderable 11% decline on its sales over the past 12 months. Per-share earnings are expected to leap 101% to US$4.73. Before this earnings report, the analysts had been forecasting revenues of US$1.23b and earnings per share (EPS) of US$4.58 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target fell 31% to US$75.00, suggesting the increase in earnings forecasts was not enough to offset other the analysts concerns.
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 11% revenue decline a notable change from historical growth of 2.9% 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 8.2% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Kaiser Aluminum is expected to lag 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 Kaiser Aluminum's earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Kaiser Aluminum. Long-term earnings power is much more important than next year's profits. We have analyst estimates for Kaiser Aluminum going out as far as 2022, and you can see them free on our platform here.
Plus, you should also learn about the 4 warning signs we've spotted with Kaiser Aluminum .
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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