Investors in Kenmare Resources plc (LON:KMR) had a good week, as its shares rose 3.8% to close at UK£1.76 following the release of its full-year results. Kenmare Resources beat revenue expectations by 2.8%, recording sales of US$271m. Statutory earnings per share (EPS) came in at US$0.40, some 4.2% short of analyst estimates. 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for Kenmare Resources from five analysts is for revenues of US$280.5m in 2020 which, if met, would be a modest 3.5% increase on its sales over the past 12 months. Statutory earnings per share are predicted to rise 2.9% to US$0.42. Before this earnings report, the analysts had been forecasting revenues of US$269.5m and earnings per share (EPS) of US$0.44 in 2020. Overall it looks as though the analysts were a bit mixed on the latest results. Although there was a a modest to revenue, the consensus also made a small dip in to its earnings per share forecasts.
The consensus price target fell 7.7% to US$5.33, suggesting that the analysts are primarily focused on earnings as the driver of value for this business. 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. The most optimistic Kenmare Resources analyst has a price target of US$5.79 per share, while the most pessimistic values it at US$4.94. This is a very narrow spread of estimates, implying either that Kenmare Resources is an easy company to value, or – more likely – the analysts are relying heavily on some key assumptions.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Kenmare Resources’s revenue growth is expected to slow, with forecast 3.5% increase next year well below the historical 14%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 0.4% next year. So it’s pretty clear that, while Kenmare Resources’s revenue growth is expected to slow, it’s still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Kenmare Resources’s future valuation.
With that in mind, we wouldn’t be too quick to come to a conclusion on Kenmare Resources. Long-term earnings power is much more important than next year’s profits. We have estimates – from multiple Kenmare Resources analysts – 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 1 warning sign for Kenmare Resources that you should be aware of.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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