United Malt Group Limited Just Missed Earnings - But Analysts Have Updated Their Models

It's shaping up to be a tough period for United Malt Group Limited (ASX:UMG), which a week ago released some disappointing half-yearly results that could have a notable impact on how the market views the stock. United Malt Group missed earnings this time around, with AU$590m revenue coming in 6.5% below what the analysts had modelled. Statutory earnings per share (EPS) of AU$0.044 also fell short of expectations by 10%. 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.

Check out our latest analysis for United Malt Group

After the latest results, the nine analysts covering United Malt Group are now predicting revenues of AU$1.25b in 2021. If met, this would reflect an okay 2.8% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to decrease 2.4% to AU$0.13 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of AU$1.21b and earnings per share (EPS) of AU$0.14 in 2021. Overall it looks as though the analysts were a bit mixed on the latest results. Although there was a an okay to revenue, the consensus also made a minor downgrade to its earnings per share forecasts.

There's been no major changes to the price target of AU$4.61, suggesting that the impact of higher forecast sales and lower earnings won't result in a meaningful change to the business' valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic United Malt Group analyst has a price target of AU$5.10 per share, while the most pessimistic values it at AU$4.05. This is a very narrow spread of estimates, implying either that United Malt Group is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

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. One thing stands out from these estimates, which is that United Malt Group is forecast to grow faster in the future than it has in the past, with revenues expected to display 5.7% annualised growth until the end of 2021. If achieved, this would be a much better result than the 6.7% annual decline over the past year. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 8.3% annually for the foreseeable future. Although United Malt Group's revenues are expected to improve, it seems that the analysts are still bearish on the business, forecasting it to grow slower than the broader industry.

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. They also upgraded their revenue estimates for next year, even though sales are expected to grow slower than the wider industry. The consensus price target held steady at AU$4.61, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for United Malt Group going out to 2025, and you can see them free on our platform here..

You still need to take note of risks, for example - United Malt Group has 3 warning signs we think you should be aware of.

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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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