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Ternium S.A. (NYSE:TX) Analysts Just Slashed This Year's Estimates

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·4 min read
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The analysts covering Ternium S.A. (NYSE:TX) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. The stock price has risen 8.0% to US$13.79 over the past week. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

Following the latest downgrade, the current consensus, from the 13 analysts covering Ternium, is for revenues of US$8.6b in 2020, which would reflect a not inconsiderable 16% reduction in Ternium's sales over the past 12 months. Statutory earnings per share are anticipated to plunge 60% to US$1.15 in the same period. Previously, the analysts had been modelling revenues of US$9.2b and earnings per share (EPS) of US$1.83 in 2020. From this we can that analyst sentiment has definitely become more bearish after the latest update, leading to lower revenue forecasts and a large cut to earnings per share estimates.

See our latest analysis for Ternium

NYSE:TX Past and Future Earnings April 24th 2020
NYSE:TX Past and Future Earnings April 24th 2020

It'll come as no surprise then, to learn that the analysts have cut their price target 8.3% to US$18.89. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Ternium, with the most bullish analyst valuing it at US$32.00 and the most bearish at US$12.00 per share. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Ternium's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 16%, a significant reduction from annual growth of 8.3% 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 7.1% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Ternium is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Ternium going out to 2024, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks 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.