Bearish: Analysts Just Cut Their First Quantum Minerals Ltd. (TSE:FM) Revenue and EPS estimates

One thing we could say about the analysts on First Quantum Minerals Ltd. (TSE:FM) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

After the downgrade, the consensus from First Quantum Minerals' 15 analysts is for revenues of US$6.4b in 2024, which would reflect an uncomfortable 9.9% decline in sales compared to the last year of performance. Statutory earnings per share are forecast to be US$0.90, approximately in line with the last 12 months. Previously, the analysts had been modelling revenues of US$7.1b and earnings per share (EPS) of US$0.92 in 2024. It's pretty clear that analyst sentiment has fallen after the recent consensus updates, leading to lower revenue forecasts and a small dip in earnings per share estimates.

See our latest analysis for First Quantum Minerals

The consensus price target fell 11% to US$14.61, with the weaker earnings outlook clearly leading analyst valuation estimates. 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 First Quantum Minerals, with the most bullish analyst valuing it at US$26.75 and the most bearish at US$8.68 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 8.0% by the end of 2024. This indicates a significant reduction from annual growth of 16% 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 13% per year. It's pretty clear that First Quantum Minerals' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for First Quantum Minerals. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that First Quantum Minerals' revenues are expected to grow slower than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of First Quantum Minerals.

That said, the analysts might have good reason to be negative on First Quantum Minerals, given its declining profit margins. Learn more, and discover the 3 other flags we've identified, 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 that insiders are buying.

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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.