Cosan S.A. Just Reported A Surprise Loss: Here's What Analysts Think Will Happen Next

Last week saw the newest second-quarter earnings release from Cosan S.A. (BVMF:CSAN3), an important milestone in the company's journey to build a stronger business. Revenues fell badly short of expectations, with revenue of R$11b missing analyst predictions by 70%. Statutory earnings correspondingly nosedived, with Cosan reporting a loss of R$0.12 per share, where the analysts were expecting a profit. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Cosan

Taking into account the latest results, the most recent consensus for Cosan from eight analysts is for revenues of R$158.1b in 2024. If met, it would imply a substantial 292% increase on its revenue over the past 12 months. Per-share earnings are expected to surge 36% to R$1.90. Yet prior to the latest earnings, the analysts had been anticipated revenues of R$162.0b and earnings per share (EPS) of R$1.56 in 2024. Although the analysts have lowered their revenue forecasts, they've also made a considerable lift to their earnings per share estimates, which implies there's been something of an uptick in sentiment following the latest results.

The consensus has made no major changes to the price target of R$22.59, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Cosan at R$30.00 per share, while the most bearish prices it at R$13.00. 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.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Cosan's rate of growth is expected to accelerate meaningfully, with the forecast 14x annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 28% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 0.9% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Cosan to grow faster than the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Cosan following these results. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Even so, long term profitability is more important for the value creation process. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Cosan analysts - going out to 2026, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 2 warning signs for Cosan (of which 1 can't be ignored!) you should know about.

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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.