Ero Copper Corp. (TSE:ERO) Just Released Its Second-Quarter Earnings: Here's What Analysts Think

Ero Copper Corp. (TSE:ERO) shareholders are probably feeling a little disappointed, since its shares fell 4.3% to CA$11.12 in the week after its latest quarterly results. Results look mixed - while revenue fell marginally short of analyst estimates at US$115m, statutory earnings were in line with expectations, at US$2.25 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Check out our latest analysis for Ero Copper

Taking into account the latest results, the current consensus, from the nine analysts covering Ero Copper, is for revenues of US$452.8m in 2022, which would reflect a measurable 3.8% reduction in Ero Copper's sales over the past 12 months. Statutory earnings per share are forecast to fall 14% to US$1.53 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$442.9m and earnings per share (EPS) of US$1.92 in 2022. So it's pretty clear the analysts have mixed opinions on Ero Copper after the latest results; even though they upped their revenue numbers, it came at the cost of a large cut to per-share earnings expectations.

There's been no major changes to the price target of CA$19.64, suggesting that the impact of higher forecast sales and lower earnings won't result in a meaningful change to the business' valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Ero Copper, with the most bullish analyst valuing it at CA$27.00 and the most bearish at CA$16.00 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Ero Copper's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 7.4% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 25% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 12% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Ero Copper is expected to lag the wider 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. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. The consensus price target held steady at CA$19.64, 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. We have estimates - from multiple Ero Copper analysts - going out to 2024, and you can see them free on our platform here.

Before you take the next step you should know about the 3 warning signs for Ero Copper (1 doesn't sit too well with us!) that we have uncovered.

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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.