Salzgitter AG Just Reported A Surprise Loss: Here's What Analysts Think Will Happen Next

Last week, you might have seen that Salzgitter AG (ETR:SZG) released its second-quarter result to the market. The early response was not positive, with shares down 2.6% to €15.09 in the past week. Revenues came in at €2.6b, in line with estimates, while Salzgitter reported a statutory loss of €0.64 per share, well short of prior analyst forecasts for a profit. 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Salzgitter

Following last week's earnings report, Salzgitter's nine analysts are forecasting 2024 revenues to be €10.1b, approximately in line with the last 12 months. Statutory earnings per share are predicted to leap 129% to €0.89. Before this earnings report, the analysts had been forecasting revenues of €10.1b and earnings per share (EPS) of €1.55 in 2024. So there's definitely been a decline in sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at €20.50, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Salzgitter at €45.00 per share, while the most bearish prices it at €14.50. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the 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. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 2.7% by the end of 2024. This indicates a significant reduction from annual growth of 8.5% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 1.9% annually for the foreseeable future. It's pretty clear that Salzgitter's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Salzgitter. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Salzgitter's revenue is expected to perform worse than the wider industry. 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.

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 Salzgitter analysts - going out to 2026, and you can see them free on our platform here.

Even so, be aware that Salzgitter is showing 3 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

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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.