Sasol Limited Beat Revenue Forecasts By 9.9%: Here's What Analysts Are Forecasting Next
It's been a sad week for Sasol Limited (JSE:SOL), who've watched their investment drop 11% to R271 in the week since the company reported its half-yearly result. Results overall were respectable, with statutory earnings of R62.34 per share roughly in line with what the analysts had forecast. Revenues of R152b came in 9.9% ahead of analyst predictions. 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
See our latest analysis for Sasol
Following the recent earnings report, the consensus from nine analysts covering Sasol is for revenues of R295.2b in 2023, implying a perceptible 4.0% decline in sales compared to the last 12 months. Statutory earnings per share are expected to tumble 23% to R46.21 in the same period. In the lead-up to this report, the analysts had been modelling revenues of R284.0b and earnings per share (EPS) of R64.62 in 2023. So it's pretty clear the analysts have mixed opinions on Sasol after the latest results; even though they upped their revenue numbers, it came at the cost of a pretty serious reduction to per-share earnings expectations.
There's been no major changes to the price target of R377, suggesting that the impact of higher forecast sales and lower earnings won't result in a meaningful change to the business' valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Sasol analyst has a price target of R550 per share, while the most pessimistic values it at R275. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying 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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 7.9% by the end of 2023. This indicates a significant reduction from annual growth of 9.2% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 1.3% per year. So it's pretty clear that Sasol's revenues are expected to shrink faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Sasol. They also upgraded their revenue estimates, with sales apparently performing well, although revenues are expected to lag the wider industry this year. 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.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Sasol going out to 2025, and you can see them free on our platform here.
It is also worth noting that we have found 1 warning sign for Sasol that you need to take into consideration.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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