Analysts Have Just Cut Their South32 Limited (ASX:S32) Revenue Estimates By 19%

The latest analyst coverage could presage a bad day for South32 Limited (ASX:S32), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

After the downgrade, the eight analysts covering South32 are now predicting revenues of US$6.7b in 2025. If met, this would reflect a huge 20% improvement in sales compared to the last 12 months. Before the latest update, the analysts were foreseeing US$8.3b of revenue in 2025. The consensus view seems to have become more pessimistic on South32, noting the measurable cut to revenue estimates in this update.

See our latest analysis for South32

There was no particular change to the consensus price target of US$2.45, with South32's latest outlook seemingly not enough to result in a change of 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. There are some variant perceptions on South32, with the most bullish analyst valuing it at US$3.06 and the most bearish at US$1.49 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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. It's clear from the latest estimates that South32's rate of growth is expected to accelerate meaningfully, with the forecast 20% annualised revenue growth to the end of 2025 noticeably faster than its historical growth of 3.4% 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 1.2% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect South32 to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They're also forecasting more rapid revenue growth than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of South32 going forwards.

Hungry for more information? At least one of South32's eight analysts has provided estimates out to 2027, which can be seen for 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 with high insider ownership.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.