Lundin Mining Corporation (TSE:LUN): Are Analysts Right About The Drop In Earnings?

After Lundin Mining Corporation’s (TSX:LUN) earnings announcement in December 2017, analyst consensus outlook appear bearish, with profits predicted to drop by -21.48% next year. However, this outlook is not unsubstantiated given the negative earnings growth rate over the past five years on average. Presently, with earnings at US$371.42M, we should see this fall to US$291.65M by 2019. Below is a brief commentary on the longer term outlook the market has for Lundin Mining. Readers that are interested in understanding the company beyond these figures should research its fundamentals here. Check out our latest analysis for Lundin Mining

How is Lundin Mining going to perform in the near future?

The view from 25 analysts over the next three years is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To get an idea of the overall earnings growth trend for LUN, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
TSX:LUN Future Profit Mar 8th 18
TSX:LUN Future Profit Mar 8th 18
From the current net income level of US$371.42M and the final forecast of US$493.30M by 2021, the annual rate of growth for LUN’s earnings is 13.18%. This leads to an EPS of $0.69 in the final year of projections relative to the current EPS of $0.51. The primary reason for earnings growth is due to cost cutting activities, as revenues is expected to grow much slower than earnings. Margins is currently sitting at 17.88%, which is expected to expand to 20.90% by 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Lundin Mining, there are three relevant aspects you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Lundin Mining worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Lundin Mining is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Lundin Mining? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!