Kraton Corporation (NYSE:KRA) Analysts Are Pretty Bullish On The Stock After Recent Results
Shareholders will be ecstatic, with their stake up 59% over the past week following Kraton Corporation's (NYSE:KRA) latest quarterly results. The results were positive, with revenue coming in at US$427m, beating analyst expectations by 4.2%. 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
See our latest analysis for Kraton
Taking into account the latest results, the four analysts covering Kraton provided consensus estimates of US$1.57b revenue in 2020, which would reflect a not inconsiderable 12% decline on its sales over the past 12 months. Prior to the latest earnings, the analysts were forecasting revenues of US$1.58b in 2020, and did not provide an earnings per share estimate. From what we can see of these results, it looks like Kraton is performing in line with expectations. the analysts we track have all updated their numbers following the results, and there were no major changes to their forecasts for next year.
The average price target rose 12% to US$13.88, with the analysts clearly having become more optimistic about Kraton'sprospects following these results. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Kraton analyst has a price target of US$23.00 per share, while the most pessimistic values it at US$4.50. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 12%, a significant reduction from annual growth of 11% 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 3.0% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Kraton is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their revenue estimates for next year, suggesting that the business is performing in line with expectations. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse 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.
We have estimates for Kraton from its four analysts out to 2022, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 3 warning signs for Kraton (1 is significant!) that you should be aware of.
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