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There's been a notable change in appetite for Century Aluminum Company (NASDAQ:CENX) shares in the week since its third-quarter report, with the stock down 13% to US$6.58. Revenues were a bright spot, with US$393m in sales arriving 5.1% ahead of expectations, although statutory earnings didn't fare nearly so well, recording a loss of US$0.65, some 3.2% below consensus predictions. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
After the latest results, the three analysts covering Century Aluminum are now predicting revenues of US$1.73b in 2021. If met, this would reflect a reasonable 4.8% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 39% to US$0.63. Before this earnings announcement, the analysts had been modelling revenues of US$1.77b and losses of US$0.33 per share in 2021. While next year's revenue estimates dropped there was also a loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.
The average price target fell 14% to US$6.00, implicitly signalling that lower earnings per share are a leading indicator for Century Aluminum's valuation. 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. Currently, the most bullish analyst values Century Aluminum at US$7.00 per share, while the most bearish prices it at US$4.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Century Aluminum shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Century Aluminum's rate of growth is expected to accelerate meaningfully, with the forecast 4.8% revenue growth noticeably faster than its historical growth of 2.1%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 7.8% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, Century Aluminum is expected to grow slower than the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Century Aluminum. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Century Aluminum going out to 2022, and you can see them free on our platform here..
We don't want to rain on the parade too much, but we did also find 3 warning signs for Century Aluminum that you need to be mindful 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.
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