Quaker Chemical Corporation (NYSE:KWR) defied analyst predictions to release its third-quarter results, which were ahead of market expectations. Quaker Chemical delivered a significant beat to revenue and earnings per share (EPS) expectations, with sales hitting US$367m, some 11% above indicated. Statutory EPS were US$1.53, an impressive 96% ahead of forecasts. 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. 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 consensus forecast from Quaker Chemical's four analysts is for revenues of US$1.48b in 2021, which would reflect a satisfactory 3.8% improvement in sales compared to the last 12 months. Per-share earnings are expected to leap 1,403% to US$5.38. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.48b and earnings per share (EPS) of US$4.88 in 2021. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the nice increase in earnings per share expectations following these results.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 5.4% to US$195. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Quaker Chemical, with the most bullish analyst valuing it at US$200 and the most bearish at US$188 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Quaker Chemical is an easy business to forecast or the the analysts are all using similar assumptions.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Quaker Chemical's past performance and to peers in the same industry. We would highlight that Quaker Chemical's revenue growth is expected to slow, with forecast 3.8% increase next year well below the historical 13%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 5.6% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Quaker Chemical.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Quaker Chemical following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Quaker Chemical's revenues are expected to 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.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Quaker Chemical going out to 2024, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 4 warning signs for Quaker Chemical (1 shouldn't be ignored) you should be aware of.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.com.