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Shorn Like A Sheep: Analysts Just Shaved Their Constellium SE (NYSE:CSTM) Forecasts Dramatically

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Today is shaping up negative for Constellium SE (NYSE:CSTM) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the consensus from Constellium's seven analysts is for revenues of €5.0b in 2020, which would reflect a not inconsiderable 16% decline in sales compared to the last year of performance. Statutory earnings per share are presumed to soar 77% to €0.76. Previously, the analysts had been modelling revenues of €6.1b and earnings per share (EPS) of €0.95 in 2020. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a real cut to earnings per share numbers as well.

See our latest analysis for Constellium

NYSE:CSTM Past and Future Earnings April 23rd 2020
NYSE:CSTM Past and Future Earnings April 23rd 2020

It'll come as no surprise then, to learn that the analysts have cut their price target 6.2% to €14.12. 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. Currently, the most bullish analyst values Constellium at €22.57 per share, while the most bearish prices it at €5.55. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with the forecast 16% revenue decline a notable change from historical growth of 6.7% 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 6.7% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Constellium is expected to lag the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Constellium. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Constellium.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Constellium, including its declining profit margins. Learn more, and discover the 2 other risks we've identified, for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.